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AGGLOMERATION: The clustering of several similar or related activities at the same location. Many industries have firms that tend to agglomerate, that is, locate very close to one another, leading to geographic concentration. For example, the motion picture industry is concentrated in California, the fashion industry is concentrated in New York, and the petroleum industry is concentrated in Texas. Agglomeration can be caused by accessibility to a concentrated natural resource (such as petroleum or sunny weather), but if often feeds upon itself through agglomeration economies. Firms in the same industry often have lower production cost when the located near their competitors.

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Lesson 23: Factor Market Equilibrium | Unit 4: Monopsony Page: 18 of 24

Topic: Efficiency <=PAGE BACK | PAGE NEXT=>

  • The primary condition for profit-maximization AND efficiency derived from the analysis of the firm's labor employment is:

  • MRP = MFC > W
  • As such, marginal revenue product (MRP) is also greater than the factor price (W).

  • This means the market is NOT efficient.

  • Consider the profit-maximizing employment of labor services illustrated in this diagram.

  • Clearly wage paid in monopsony is lower and the quantity of factor services employed is less.

  • The conclusion is that monopsony, like it's selling counterpart monopoly, is NOT efficient.


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PRICE RATIONING

The distribution or allocation of a limited commodity using markets and prices. Rationing is needed due to the scarcity problem. Because wants and needs are unlimited, but resources are limited, available commodities must be rationed out to competing uses. Markets ration commodities by limiting the purchase only to those buyers willing and able to pay the price.

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Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway seeking to buy either car battery jumper cables or a dozen high trajectory optic orange golf balls. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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Rosemary, long associated with remembrance, was worn as wreaths by students in ancient Greece during exams.
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