Consider a firm that sells output at P = 5 and has a short-run production function: Q(L) = 20L − L^2. Its wage rate function is w = 40 + 2L. - Suppose the firm is a monopsonist, how much labor will it hire to maximize profits? How much wage will it pay? - Solve for the rate of monopsonistic exploitation. - If instead, the firm is operating in a perfectly competitive market, how much labor will it hire to maximize profits? How much wage will it pay?

Consider a firm that sells output at P = 5 and has a short-run production function: Q(L) = 20L − L^2. Its wage rate function is w = 40 + 2L. - Suppose the firm is a monopsonist, how much labor will it hire to maximize profits? How much wage will it pay? - Solve for the rate of monopsonistic exploitation. - If instead, the firm is operating in a perfectly competitive market, how much labor will it hire to maximize profits? How much wage will it pay?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter11: Labor Markets

Section: Chapter Questions

Problem 19SQ

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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?
B. Consider a firm who sells output at p=10 and has a short run production function Q(L)=20L-L2. Its wage rate function is w=40+2.5L. Suppose the firm is a monopsonist, how much labor will it hire to maximize profits?
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You are a labor economist trying to evaluate whether the labor market for computer scientists is competitive or monopsonistic. Based on previous research, you know that the production function for computers depends only on labor input: Y = -0.5L^2 + 10L; where Y is the output of computers and L is the quantity of labor used. The price of a computer is p = 2. You also know that the labor supply, as a function of the wage, for computer scientists is the following, where w is the wage per unit of labor: L = -10 + w. a. Find the equilibrium wages and employment (wc; Lc) that would prevail if the market for computer scientists were competitive. [Remember that a competitive firm takes the wage as given : that is, it assumes that the quantity of workers that it hires has no effect on the price of the next worker. (Of course, the equilibrium wage must equate demand and supply)].
The monopsonist will hire 50 units of labor at a wage rate of w = L = 50. In comparison to a perfectly competitive employer who hires 50 units of labor at a wage rate of 100, the monopsonist hires half the quantity of labor at half the wage rate. Hence, the statement is true.