intersects the demand curve.The monopsonist hires less labor,and the wage paid will be less than ina competitive market. 5.Rock musicians sometimes earn over s1 million per year.Can you explain such large incomes in terms ofeconomic rent? Economic rent is the difference between the actual payment to the factor of production and the minimum amount that the factor is willing to accept In this case,you might assume that there are a limited number of top-quality rock musicians who will continue to play rock music no matter what they are paid.This supply CU rve,or something close to it Given the high demand music,the wage will be ery high and there will be a lot of economic rent.If there was a larger supply of top-quality rock musicians,or a more elastic supply,then the economic rent would be smaller. 6.What happens to the demand for one input when the use of a complementary input increases? If the demand for the complementary input increases,the demand for the given input will inerease as well.When demand for the compmentary input there is an increase in the e quantity hir ed and possibly the price paid Both of thes changes will increase the MRP of the given input,and hence will increase the quantity hired and possibly the price paid.Whether the prices of the inputs increases depends on the degree of monopsony poweron the part of the firm. 7.For a monopsonist,what is the relationship between the supply of an input and the marginal expenditure on it? The decision to increase empbyr sonist must pay all units the highe and not just the expe curve lies above the input supply curve (the average expenditure curve).Hiring more labor will increase the marginal expenditure,which will increase the average expenditure.If the average expenditure is increasing.then the marginal expenditure must be greater than the average expenditure 8.Currently the National Football League has a system for drafting college players by which each player is picked by only one t The player must sign with that team or not play in the league.What would happen to the wages of newly drafted and more experienced football players if the draft system were repealed,and all teams could compete for college players? The National Football League draft and reserve clause (a primary issue in the 1987-1988 season's strike)creates a monopsonist cartel among the owners of nel teams.If the draft system we rerepealed,competition among teams would inereas wages of football players to the point where the marginal evenue product of eac player would be equal to the player's wage. 9.The government wants to encourage individuals on welfare to become employed.It is considering two possible incentive programs for firms. intersects the demand curve. The monopsonist hires less labor, and the wage paid will be less than in a competitive market. 5. Rock musicians sometimes earn over $1 million per year. Can you explain such large incomes in terms of economic rent? Economic rent is the difference between the actual payment to the factor of production and the minimum amount that the factor is willing to accept. In this case, you might assume that there are a limited number of top-quality rock musicians who will continue to play rock music no matter what they are paid. This results in a perfectly inelastic supply curve, or something close to it. Given the high demand for rock music, the wage will be very high and there will be a lot of economic rent. If there was a larger supply of top-quality rock musicians, or a more elastic supply, then the economic rent would be smaller. 6. What happens to the demand for one input when the use of a complementary input increases? If the demand for the complementary input increases, the demand for the given input will increase as well. When demand for the complementary input increases, there is an increase in the quantity hired and possibly the price paid. Both of these changes will increase the MRP of the given input, and hence will increase the quantity hired and possibly the price paid. Whether the prices of the inputs increases depends on the degree of monopsony power on the part of the firm. 7. For a monopsonist, what is the relationship between the supply of an input and the marginal expenditure on it? The decision to increase employment means the monopsonist must pay all units the higher price, and not just the last unit hired. Therefore, its marginal expenditure curve lies above the input supply curve (the average expenditure curve). Hiring more labor will increase the marginal expenditure, which will increase the average expenditure. If the average expenditure is increasing, then the marginal expenditure must be greater than the average expenditure. 8. Currently the National Football League has a sys tem for drafting college players by which each player is picked by only one team. The player must sign with that team or not play in the league. What would happen to the wages of newly drafted and more experienced football players if the draft system were repealed, and all teams could compete for college players? The National Football League draft and reserve clause (a primary issue in the 1987-1988 season’s strike) creates a monopsonist cartel among the owners of NFL teams. If the draft system were repealed, competition among teams would increase wages of football players to the point where the marginal revenue product of each player would be equal to the player’s wage. 9. The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs for firms