Google
Saturday 
February 8, 2025 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
ZERO BOND: Also termed a zero coupon bond, a bond that does not pay interest, in which the return is generated by the difference between the purchase price and the face value paid at maturity. Because they do not pay interest, zero bonds are sold at a discount. For example, a $10,000 zero bond that matures in one year, would generate a 10% return if it sold at a discount of $9,000.

Visit the GLOSS*arama


AVERAGE FACTOR COST CURVE, MONOPSONY:

A curve that graphically represents the relation between average factor cost incurred by a firm for employing an input and the quantity of input used. Because average factor cost is essentially the price of the input, the average factor cost curve is also the supply curve for the input. The average factor cost curve for a firm with no market control is horizontal. The average factor cost curve for a firm with market control is positively sloped.
Monopsony is a market structure with a single buyer or in terms of factor markets, a single employer. This means that monopsony is a price maker, with control over the buying side of the market. Market control means monopsony faces a positively-sloped supply curve. To buy a larger quantity, it must pay a higher price.

The average factor cost curve reflects the degree of market control held by a firm. For a perfectly competitive firm with no market control, the average factor cost curve is a horizontal line. For firms with market control, especially monopsony, the average factor cost curve is positively sloped.

Average Factor Cost Curve,
Monopsony
Average Factor Cost Curve, Monopsony
The exhibit to the right displays the average factor cost curve for a hypothetical firm, OmniKing Island Resort. This firm is the only employer of labor on a small tropical island. As the only employer on the island, OmniKing is a monopsony with extensive market control, and it faces a positively-sloped supply curve. To employ more workers, OmniKing must pay a higher price.

The vertical axis measures total factor cost and the horizontal axis measures the quantity of input (workers). Although quantity on this particular graph stops at 10 workers, it could go higher.

This curve indicates that if OmniKing hires 1 worker (at $6 per worker), then it incurs $6 of average factor cost. Alternatively, if it hires 10 workers (at $15 per worker), then it pays $15 of average factor cost.

This positively-sloped average factor cost curve is actually nothing more than the supply curve facing OmniKing for hiring labor. In the analysis of factor markets, the average factor cost curve and the supply curve facing the firm are almost always one and the same.

Although this average factor cost curve is based on the employment activity of OmniKing Island Resort, a well-known monopsony firm, they apply to any buyer with market control. Monopsonistic competition and oligopsony firms that also face positively-sloped supply curves generate comparable average factor costs.

<= AVERAGE FACTOR COST CURVEAVERAGE FACTOR COST CURVE, PERFECT COMPETITION =>


Recommended Citation:

AVERAGE FACTOR COST CURVE, MONOPSONY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: February 8, 2025].


Check Out These Related Terms...

     | average factor cost curve | average factor cost curve, perfect competition | total factor cost | total factor cost curve | marginal factor cost | marginal factor cost curve | total cost | total product | average factor cost, perfect competition | average factor cost, monopsony |


Or For A Little Background...

     | market structures | perfect competition | perfect competition characteristics | perfect competition and demand | monopsony | oligopsony | monopsonistic competition | supply | supply price | law of supply | efficiency |


And For Further Study...

     | factor market analysis | short-run production analysis | marginal factor cost and average factor cost | factor supply | factor supply curve | supply by a firm | supply to a firm | mobility |


Search Again?

Back to the WEB*pedia


APLS

PURPLE SMARPHIN
[What's This?]

Today, you are likely to spend a great deal of time touring the new suburban shopping complex looking to buy either a rechargeable flashlight or storage boxes for your computer software CDs. Be on the lookout for telephone calls from long-lost relatives.
Your Complete Scope

This isn't me! What am I?

A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
"Learn to enjoy every minute of your life. Be happy now. Don't wait for something outside of yourself to make you happy in the future. Think how really precious is the time you have to spend, whether it's at work or with your family. Every minuteshould be enjoyed and savored."

-- Earl Nightingale

LRTC
Long Run Total Cost
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2025 AmosWEB*LLC
Send comments or questions to: WebMaster