A firm which is a monopolist in its output market and a monopsonist in an input market is:
A)inefficient because VMP MRP and MFC w.
B)inefficient because VMP MRP.
C)efficient.
D)inefficient because MFC w.

Question

A firm which is a monopolist in its output market and a monopsonist in an input market is:
A)inefficient because VMP > MRP and MFC > w.
B)inefficient because VMP > MRP.
C)efficient.
D)inefficient because MFC > w.

Quizplus · Accepted Answer

A firm that is both a monopolist and a monopsonist is inefficient because it restricts output to maximize profit, leading to a situation where the value of the marginal product (VMP) is greater than the marginal revenue product (MRP), and the marginal factor cost (MFC) is greater than the wage rate (w).

A Firm Which Is a Monopolist in Its Output Market