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Homework answers / question archive / Cate's Ready Mix Cement Company is a monopsony

Cate's Ready Mix Cement Company is a monopsony

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Cate's Ready Mix Cement Company is a monopsony. The table below provides information about the supply of cement technicians and the total quantity they can produce per day.

The price of a ton of cement is $10.

 

Wage rate ($ per day) Number of workers Q (tons per day)
25 0 0
30 1 18
35 2 34
40 3 48
45 4 60
50 5 70
55 6 78
60 7 84

 

When transaction cost is low and the problem of external costs is resolved through private negotiations, the theorem that applies is known as the:

A. Adam Smith theorem.

B. Property rights theorem.

C. Private market efficient theorem.

D. Emission rights theorem.

F. Pigovian theorem.

G. Case theorem.

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The correct option is:

G. Coase Theorem

Coase theorem developed by Ronald Coase states that in case of market failure because of the presence of conflicting property rights, the bargaining between the parties would lead to an efficient outcome with low transaction costs.

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