There is only one buyer in a labour market. a) Prove that if labour supply inverse curve is W=a+bL, marginal expenditure for a monopsonist in the labour market is ME=a+2bL. b) Explain why this monopsonist buyer's profit is the maximum value when the marginal revenue product of labour equals marginal expenditure. c) Calculate the deadweight loss of monopsony using the below graph. Wages ($/hour) ME $42.00 21.00
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- Table 14.13 shows information from the supply curve for labor for a monopsonist, that is, the wage rate required at each level of employment. What is the monopsonists marginal cost of labor at each level of employment? If each unit of labors marginal revenue product is 13, what is the firms profit maximizing level of employment and wage?Is there a deadweight loss if a firm produces the quantity of output at which price equals marginal cost? Explain.A pure monopsony buyer of a resource, in this case, labor L, has a marginal value curve for labor expressed as MV=140-0.4L Its total expenditure function is TE=20L+0.1L2 a) Suppose the firm acts as a monopsonist, What wage will it pay workers and how many hours of labor will the firm hire b) what is the value of deadweight loss given the firm is acting as a monopsonist?
- Suppose that the Ebay warehouse behaves as a monopsonist in the local labor market. Assume that its labor supply curve is w(LS) = 4LS and its labor demand curve is w(LD ) = 42.8−2LD. To maximize its profits: a. how many units of labor will Ebay hire and b. what wage will Ebay pay? Now suppose that the local labor union goes on strike and Ebay is eventually forced to increase the pay of its workers to a competitive wage. What wage would Ebay then have to pay? c. Find competitive wage The correct answers are: a. 4.28 b. 17.12 c. 28.52Assume a monopsony uses only one factor, i.e. labor, L, to produce a final good, Q, which is sold in a competitive market at the price p = 1 to maximise profits. The production function of the monopsonist is given by Q (L) = 100L - 1L². The inverse supply curve for labor is w(L) = 2 20 + 2 L. a. Derive and describe the monopsony's inverse demand curve for labor. b. Describe algebraically and graphically how many units of labor the monopsony hires and at what wage. Describe the nature of monopsony power and provide economic intuition.Big Cheese Inc. is the only employer in a small town in rural Louisiana and thus acts as a monopsony-that is, a buyer's monopoly. Its main product is cheddar cheese, which it sells in a perfectly competitive market. The following graph shows the marginal revenue product of labor (MRP) curve it faces, its labor supply curve, and its marginal factor cost (MFC) curve. Use the black point (plus symbol) to indicate the quantity of labor Big Cheese Inc. will hire and the wage rate it will pay for its workers. WAGE RATE (Dollars per hour) 60 57 54 51 48 45 42 36 33 30 27 12 9 H MRP MFC 3 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY OF LABOR (Workers per hour) Monopsonistic Outcome Labor Supply Big Cheese Inc. will hire workers at a wage rate of $ per hour. (?) Which of the following explains why the MFC curve lies above the labor supply curve? ◇ Each worker must be paid benefits in addition to the wage rate. ○ The marginal cost of hiring an additional worker includes not only that worker's wage but also…
- We want to model the oil markets of the 19th century. And let the inverse demand for oil be P = 300 - 2Q, and the marginal cost of producing oil be MC = Q. Standard Oil, during the second half of the 19th century, can be modeled as a monopsony. If we assume the oil market is a monopsony, what is the quantity produced in equilibrium? Give the exact value up to two sig figs after the decimal point.The employment of teaching assistants (TAs) by major universities can be characterized as a monopsony. Suppose the demand for TAs is W = 30,000-125Q, where W is the wage (as an annual salary) and n is the number of TAs hired. The supply of TAs is given by W = 1,100 + 75Q, and the marginal expenditure curve is ME = 1,100 + 150Q. a. If the university takes advantage of its monopsonist position, how many TAs will it hire? What wage will it pay? (Round your responses to two decimal places.) The university will hire TAs at a wage of $ per year.Can a monopsony exercise monopsony power if the supply curve it faces is horizontal? Why or why not? Explain with detail.
- Q. 2 Suppose a firm is the sole employer in town, facing a labor supply curve w(L) = 0.5L. This monopsony is a price taker in the output market and has demand for labor DL = 200 – L (this is the marginal revenue product of labor). a) Calculate the total L demanded by the monopsony and compare it with perfect competition. b) Calculate producer surplus, compare it with perfect competition. c) Calculate consumer surplus and compare it with perfect competition. d) Calculate DWL for this monopsony, comparing it to perfect competition.Consider the following figure: monopsony.PDF . Price ($ per unit output) ME P1 P2 P3 S=AE P4 P5 MV Q1 Q2 Q3 Q4 Output A monopsonist will charge v and purchase v units. In a perfectly competitive market, the equilibrium price would be v and the equilibrium quantity would be >Jacob owns company that offers jeans in a perfectly competitive product market. Jacob is a monopsonist in the labor market, and the table below shows the wages necessary for workers to supply their labor to Jacob's firm. Total Wage Bill Marginal Wage Employment Wage (TWB) Cost (MWC) 1 20 30 3 40 4 50 60 Question A Calculate the firm's total wage bill and marginal wage cost in each empty cell for the table above. Question B Referring to the table above, by how much does profit change with the hiring of the fourth worker if the marginal revenue product of the fourth worker is $90? 24 Question C Referring to the table above, if minimum wage was implemented by the government and set at a wage of $50, how would profit change for hiring the fourth work with a marginal revenue product of $90? $ Question D Assume now that the demand for labor is linear and is such that the firm would be willing to hire 1 worker for $80, 2 workers for $70, and so on. Using only the supply information in the…