Suppose a monopoly producer is also a monopsonist in the labor market. Demand for the output is p = 100 - Q. The production function is Q = L, and the labor supply curve is w = 10 + L. How much labor does the firm hire? What wage is paid?
What will be an ideal response?
The firm's marginal revenue product of labor is MRP = 100 - 2L. Marginal expenditure is
10 + 2L. Setting them equal yields 10 + 2L = 100 - 2L or L = 90/4 = 22.5 units of labor, for which the firm will pay a wage of (10 + L) = 32.5.
Economics
You might also like to view...
For consideration of such issues as labor's productivity growth nationwide, the relevant measure is the
A) marginal product of labor. B) average product of labor. C) total product of labor. D) wage. E) cost of capital.
Economics
The profit-maximizing quantity of the monopolist compared to the perfectly competitive industry in the above figure are, respectively
A) Q1 and Q2. B) Q1 and Q3. C) Q1 and Q5. D) Q2 and Q3.
Economics