Practice question · Match the pairs
Match each factor-market concept to its definition.
- Monopsony
- Human capital
- Compensating differential
- Competitive firm hires until marginal value equals wage
- Education and training that increase productivity
- Higher pay for unpleasant or dangerous work
- Single buyer of labour pays below VMP
Hints
- Separate productivity from market power from investment in skills.
- One concept explains why unpleasant jobs pay more.
Show the answer
- → Competitive firm hires until marginal value equals wage
- Monopsony → Single buyer of labour pays below VMP
- Human capital → Education and training that increase productivity
- Compensating differential → Higher pay for unpleasant or dangerous work
Why
Four concepts governing wages, marginal productivity, market power, investment in skills, and non-pecuniary attributes.
Practise Factor Markets
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