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 $42.00 21.00
There is only one buyer in a labour market. a) Prove that if labour supply inverse curve is W=a+bL, marginal expenditure for a monopsonist in the labour market is ME=a+2bL. b) Explain why this monopsonist buyer's profit is the maximum value when the marginal revenue product of labour equals marginal expenditure. c) Calculate the deadweight loss of monopsony using the below graph. Wages ($/hour) ME $42.00 21.00
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter14: Labor Markets And Income
Section: Chapter Questions
Problem 8SCQ: Table 14.13 shows information from the supply curve for labor for a monopsonist, that is, the wage...
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![There is only one buyer in a labour market.
a) Prove that if labour supply inverse curve is W=a+bL, marginal expenditure for a monopsonist
in the labour market is ME=a+2bL.
b) Explain why this monopsonist buyer's profit is the maximum value when the marginal revenue
product of labour equals marginal expenditure.
c) Calculate the deadweight loss of monopsony using the below graph.
Wages
($/hour)
ME
$42.00
21.00
10.50
MRPL
Quantity of
labor (hours)
4256
Q2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ccddde9-6293-4ca9-add0-e7ef689c83f0%2F2edb3613-dfa3-4a65-a3bc-5f2f675a923f%2Fopah1hh3_processed.png&w=3840&q=75)
Transcribed Image Text:There is only one buyer in a labour market.
a) Prove that if labour supply inverse curve is W=a+bL, marginal expenditure for a monopsonist
in the labour market is ME=a+2bL.
b) Explain why this monopsonist buyer's profit is the maximum value when the marginal revenue
product of labour equals marginal expenditure.
c) Calculate the deadweight loss of monopsony using the below graph.
Wages
($/hour)
ME
$42.00
21.00
10.50
MRPL
Quantity of
labor (hours)
4256
Q2
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