Solving for the equilibrium wage and quantity is a multi-step procedure. First, you will need the marginal resource cost (MRC) curve. This curve gives the marginal cost of hiring an additional nurse (in cost per hour). Since attracting an additional nurse requires raising the wage rate for all nurses, this cost is above the wage rate required for that additional nurse. If the inverse supply curve is given as W = a + bQs, the marginal resource cost is: MRC = a + 2bQs Essentially, it has the same y-axis intercept as the inverse supply curve, but twice the slope. With a single buyer there isn’t a demand curve, but what we would think of the demand curve is the marginal value curve. In this case, it gives the marginal value product (in dollars per hour) of nurses. Hence, you can replace W in the inverse demand function with MVP. To find the quantity of nurses hired, set MRC = MVP and solve: Q. 6. With a monopsony, how many nurses are hired
Solving for the equilibrium wage and quantity is a multi-step procedure. First, you will need the marginal resource cost (MRC) curve. This curve gives the marginal cost of hiring an additional nurse (in cost per hour). Since attracting an additional nurse requires raising the wage rate for all nurses, this cost is above the wage rate required for that additional nurse. If the inverse supply curve is given as
W = a + bQs,
the marginal resource cost is:
MRC = a + 2bQs
Essentially, it has the same y-axis intercept as the inverse supply curve, but twice the slope.
With a single buyer there isn’t a demand curve, but what we would think of the demand curve is the marginal value curve. In this case, it gives the marginal value product (in dollars per hour) of nurses. Hence, you can replace W in the inverse demand function with MVP.
To find the quantity of nurses hired, set MRC = MVP and solve:
Q. 6. With a monopsony, how many nurses are hired?
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