8 As a collusive monopsony, NCAA hires less labor (Student-athletes) for a lower wage (student compensation isrestricted to tuition, books, travel, meals etc). Microeconomictheory tells us that when input prices go down, the supplygoes up, and equilibrium price charged to consumers islower.Since NCAA pays lower wages, will consumers going to thegame see lower prices on tickets?O Yes, since input prices (wage) went downO No, in a collusive monopsony, price charged to consumers willactually increaseNo, the price charged to consumers will stay the sameYes, NCAA will profit from reduced price and higher attendance Your answer to the previous question can be explained by the differences in the Marginal Cost andAverage Total Cost faced by a monopsony vs a perfectly competitive firm.A monopsony's Marginal Cost curve shifts upward, compared to a perfectly competitive firm.A monopsony's ATC curve shifts down and left, compared to a perfectly competitive firm.Why is that the case?O Higher MC curve: A perfectly competitive firm faces an increasing wage. A monopsonist faces a decreasing wageas labor increasesLower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost,and earn positive profitsO Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage asit hires less laborLower ATC curve: By increasing the quantity of labor employed, a monopsonist can lower its average total cost,and earn positive profitsHigher MC curve: A perfectly competitive firm faces a higher price on inputs, and a monopsonist can pay lowerprice for inputsLower ATC curve: By restricting the quantity of labor employed, a monopsonist can increase its average total cost,thus increasing profitsHigher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higherwage as it hires more laborLower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average totalcost, and earn positive profits

Monopsony refers to the market condition where there exists a single buyer, who is the monopsonist.…

As a collusive monopsony, NCAA hires less labor (Student- athletes) for a lower wage (student compensation is restricted to tuition, books, travel, meals etc). Microeconomic theory tells us that when input prices go down, the supply goes up, and equilibrium price charged to consumers is lower. Since NCAA pays lower wages, will consumers going to the game see lower prices on tickets? O Yes, since input prices (wage) went down O No, in a collusive monopsony, price charged to consumers will actually increase O No, the price charged to consumers will stay the same Yes, NCAA will profit from reduced price and higher attendance

As a collusive monopsony, NCAA hires less labor (Student- athletes) for a lower wage (student compensation is restricted to tuition, books, travel, meals etc). Microeconomic theory tells us that when input prices go down, the supply goes up, and equilibrium price charged to consumers is lower. Since NCAA pays lower wages, will consumers going to the game see lower prices on tickets? O Yes, since input prices (wage) went down O No, in a collusive monopsony, price charged to consumers will actually increase O No, the price charged to consumers will stay the same Yes, NCAA will profit from reduced price and higher attendance

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.5P

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