Competition versus Monopsony. Consider the following data on the supply of labor

Question

Competition versus Monopsony. Consider the following data on the supply of labor and the demand for labor The first three rows show the supp y side of the market, and the last two rows show the demand side Wage Quantity of labor supplied Marginal labor cost Quantity of workers demanded Marginal-revenue product $8 9 $10 $11 $12 $13 514 $8 $10 $12 $14 $16 $18 20 $23 $21 $19 17 $15 $13 $11 a. In the perfectly competitive outcome, the equilibium wage is sand the equilibrium quantity isEnter your responses as integers) b. In the mon psony outcome, the monopsonist chooses a quantity of and pays a wage of S Enter your responses as integers. Enter your answer in each of the answer boxes pdf

Explanation / Answer

a) In a perfeclty competitive outcome , the equilbruim wage rate is $13 and the quantity is 6

because, in a perfectly competitive outcome, the firm maximize its profits where the marginal product of labor is equal to wage rate. therefore the equilbruim wage rate is $13 and quantity is 6.

b) In the monopsony outcome, the monopsonist choose a quantity of 4 and pays the wage of $11.

because, in mopopsony outcome, to maximize the profits the firm hires the labor, where the marginal product of labor is equal to the marginal labor cost.

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