Suppose a monopoly producer is also a monopsonist in the labor market. Demand for the output is p = 100 - Q. The production function is Q = L, and the labor supply curve is w = 10 + L. How much labor does the firm hire? What wage is paid?

What will be an ideal response?


The firm's marginal revenue product of labor is MRP = 100 - 2L. Marginal expenditure is 10 + 2L. Setting them equal yields 10 + 2L = 100 - 2L or L = 90/4 = 22.5 units of labor, for which the firm will pay a wage of (10 + L) = 32.5.

Economics

You might also like to view...

The over-the-counter market is located in

A) New York. B) Los Angeles. C) Chicago. D) None of the above.

Economics

Alexis de Tocqueville observed in his Democracy in America: "There is no country in which everything can be provided for by the laws, or in which political institutions can prove a substitute for

A) common sense and morality."
B) economic development."
C) police and prisons."
D) supply and demand."
E) the private pursuit of private interests."

Economics

If the best educated and most skilled persons leave a country, then in the short term this country's human capital per worker

a. and physical capital per worker will increase. b. and physical capital per worker will decrease. c. will increase but physical capital per worker will decrease. d. will decrease but physical capital per worker will increase.

Economics

Since the 1960s, most U.S. foreign aid has been administered through the:

a. United States Agency for International Development. b. United Nations. c. United States Treasury. d. United States Agency for Foreign Intervention.

Economics