LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 10, Problem 4RQ
To determine
Explain the percentage decline in
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Students have asked these similar questions
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. 28.52
A monopsonist’s products are sold in a perfect competitive market at a price of $6. If the firm’s TFC=5L+2L2 and in the short run, its marginal product equals 10.
How many units of labor will she employ and what wage will she pay?
Assume now the monopsonist firm’s product is in a monopoly market with demand function P=80-2Q. How many units of labor will she employ and what wage will she pay
A monopsonist faces a market labor supply curve w=20+L where w is wage rate and L is the number of
workers employed. If the firm's labor demand curve is w=200-4L, what is the optimal wage rate and
quantity of labor employed?
Chapter 10 Solutions
LABOR ECONOMICS
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Major League Baseball players are not eligible for...Ch. 10 - Prob. 15P
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- Given the decline in union membership over the past 50 years, what does the theory of bilateral monopoly suggest will have happened to the equilibrium level of wages over time? Why?arrow_forwardBig 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…arrow_forwardIf the demand for a good is Q = 1,400 - 100p, then marginal revenue function is given by 14-Q/50 1400-200 1400- 100 -1/100 14Q - Q²/100 The more elastic the labour supply is, the smaller the wage paid by a monopsonist. True Falsearrow_forward
- For a monopsony firm, draw two well-labelled graphs of marginal expense (as well as supply and demand). (1) no minimum wage and (2) with a binding minimum wage. In a sentence or two, explain why the marginal expensive curve is different in the two graphs.arrow_forwardIf an industry is monopolized, then Labour Demand will be below the Labour Demand under competition. However, if the firm is also a monopsonist than labour demand can be either larger or smaller than under competition. True or Falsearrow_forwardQuestion 4 Suppose that the supply and demand for labor for a monopsonist are given below: Wage Quantity of Labor Demanded Wage Quantity of Labor Supplied $2 5 $2 1 4 2 3 8 3 11 2 11 4 14 1 14 5 What is the numerical value of the marginal revenue product for the third unit of labor? What is the numerical value of the marginal resource cost for the third unit of labor?arrow_forward
- Assume 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.arrow_forwardIf an industry is monopolized, then Labour Demand will be below the Labour Demand under competition. However, if the firm is also a monopsonist than labour demand can be either larger or smaller than under competition. True False A natural monopoly occurs when a firm gains ownership of the entire stock of some natural resource and thus is able to exclude other producers. True Falsearrow_forwardexplain the differences between a monopoly and a monopsony?arrow_forward
- Can a monopsony exercise monopsony power if the supply curve it faces is horizontal? Why or why not? Explain with detail.arrow_forwardJoe's Flat Pretzels is a dominant employer of manufacturing labor in the town of Pretzelville, PA. Their demand for labor can be represented by W=24-Q where Q is measured in hundreds of hours. The supply curve of labor is W=4+0.25Q. Because Joe's Flat Pretzel has market power in the labor market, their Marginal Cost of Labor is MC=4+.5Q. How many units of labor will Joe's hire? At what wage? Provide a graph illustrating this situation.arrow_forwardEconomics That is, the aggregate supply of hockey players is given by w = 20 + 2L As demonstrated in the solutions, the aggregate demand for hockey players by the six hockey teams is given by w = We already solved for the perfectly competitive outcome and the monopsony outcome. Now, we'll consider the effects of a player's union. 1. First, assume that the players form a union, but the six teams are in competition. a) What is the equilibrium number of hockey players? What is the equilibrium wage? b) Team surplus? Player surplus? 2. Now, assume that the teams also form a league, so we have a bilateral monopoly. The league can easily coordinating the efforts of the six team owners, and thus the league has more negotiating power. In particular, the union's bargaining power is only B = 15. a) What is the equilibrium number of hockey players? b) What is the wage that gives players all the surplus? c) What is the wage that gives teams all the surplus? d) What is the negotiated equilibrium…arrow_forward
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