Assume a firm is a monopsonist that can hire its first worker for $6 but must in

Question

Assume a firm is a monopsonist that can hire its first worker for $6 but must increase the wage rate by $3 to attract each successive worker (so that the second worker must be paid $9, the third $12, and so on). The marginal revenue product of labor is given in the table below.

c. What will be the wage rate and the level of employment under monopsonistic conditions?

d. By how much does the monoposonist reduce wages below the competitive wage?

e. By how much does the monopsonist reduce employment below the competitive level?

Explanation / Answer

a) they are different .. upto some point MRC is higher than supply and after that point supply is greater than MRC that point is known as equilibrium point . b)equilibrium level is 4 where wage =15 and MRC =20 ....... MRC should be equal to or least greater than supply .... i think part c and d are unclear as wage rate for competitive market is not given....

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