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SLOPE, INVESTMENT LINE: The positive slope of the investment line is also termed the marginal propensity to invest (MPI). This slope is greater than zero but less than one, reflecting induced investment. The slope of the investment line affects the slope of the aggregate expenditures line and thus also affects the magnitude of the multiplier process.
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                           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 |  |
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.
Recommended Citation:AVERAGE FACTOR COST CURVE, MONOPSONY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: October 22, 2024].
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BEIGE MUNDORTLE
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Today, you are likely to spend a great deal of time searching the newspaper want ads hoping to buy either a blue mechanical pencil or super soft, super cuddly, stuffed animals. Be on the lookout for telephone calls from long-lost relatives.
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A half gallon milk jug holds about $50 in pennies.
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"When we do the best we can, we never know what miracle is wrought in our life or in the life of another. " -- Helen Keller, lecturer, author
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NELS
National Educational Longitudinal Survey
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