EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13, Problem 9RQ
To determine
To find:Ways to measure the strength of a monopsonist, it’s profitability and graphical presentation of profit.
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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)].
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 laborwill it hire to maximize profits? How much wage will it pay?
3. A monopsonist's inverse demand for labor can be written as D-1(w) = VMP(E)
0.005ED. Labor is supplied to the firm according to the inverse supply function S-(w)
s(E) = w = 5+0.01E,.
= 40 –
(a) Assume that it is a short-run problem and state the monopsonist's PMAX problem
mathematically.
(b) Define the monopsonist's cost and find the marginal cost.
(c) How much labor does the monopsony firm hire? At what wage rate does it hire workers?
(d) How much labor would the monopsonist approximately hire if it hired as if a perfectly
competitive firm does? At what wage rate would it hire workers approximately?
(e) Draw a graph.
(f) Approximately calculate producer surplus (PS), worker surplus (WS), and dead weight
loss (DWS) for (Emono: Wimono) and (E*, w*). State the implication of this exercise.
(g) How much labor does the monopsony firm hire and at what wage when it must pay when
it must pay a minimum wage of $25? State the implication of this exercise.
Chapter 13 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 13.1 - Prob. 1MQCh. 13.1 - Prob. 2MQCh. 13.2 - Prob. 1TTACh. 13.2 - Prob. 2TTACh. 13.3 - Prob. 1MQCh. 13.3 - Prob. 2MQCh. 13.5 - Prob. 1MQCh. 13.6 - Prob. 1MQCh. 13.6 - Prob. 1TTACh. 13.6 - Prob. 2TTA
Ch. 13.6 - Prob. 1.1TTACh. 13.6 - Prob. 2.1TTACh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQCh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.10P
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Similar questions
- 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?arrow_forwardThe inverse labour demand curve of a monopsonist employer is W= 37,500 – 80L, where Wis the annual salary and Lis the number of workers hired. The labor supply is given by W= 9,400 + 108L. (a) The marginal expenditure equation is ME= Do not include a comma in your answer. Please use capital letters (e.g. L not I) (b) To the nearest integer, the monopsonist would hire 数字 workers and, given that number of workers, the salary they would pay is, rounded to 2 decimal places (e.g. 4.12) A7 Do not include a comma in your answer.arrow_forwardA monopsonist's demand curve for labor is given by w= 15 – 2L, where w is the hourly wage rate and L is the number of person-hours hired. a. If the monopsonist's supply (AFC) curve is given by w= 1L, which gives rise to a marginal factor cost curve of MFC = 2L, how many units of labor will he employ and what wage will he pay? Instructions: Round your answer for labor to 1 decimal place. Round your answer for wage to the nearest penny (2 decimal places). Labor: Wage: $ b. How would your answers to part (a) be different if the monopsonist were confronted with a minimum wage bill requiring him to pay at least $7/hr? Instructions: Round your answer for labor to 1 decimal place. Round your answer for wage to the nearest whole number. Labor: Wage: $arrow_forward
- What would happen if the labour market is dominated by a monopsonist, and the government sets a minimum wage that is above the competitive wage? please answer with graphsarrow_forwardConsider the graph at right for a monopsonistic labor market. The competitive wage is $750.00 per hour, and the competitive labor use is 62.50 workers. In a monopsonistic labor market, the amount of labor used will be 41.7 workers and the wage will be $ per hour (round your answer to the nearest penny). (Round all of the following answers to the nearest dollar.) In a monopsonistic labor market, consumer surplus will be $ ; the monopsonistic labor market producer surplus will be area $, and the monopsonistic labor market producer deadweight loss will be $ w, wage per hour 1400.00- 1200.00- 1000.00- 800.00- 600.00- 400.00- 200.00- Monopsonistic Labor Market 833.33 0.00+ 0.0 41.7 40.0 L, Workers per hour 80.0 ME S D Qarrow_forwardAssume 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 — L². The inverse supply curve for labor is w(L) = 2 20 + 2 L. c. Describe algebraically and graphically what the welfare effects would be of the introduction of a minimum wage set at the competitive level. Would it improve welfare if the minimum wage were set above the competitive wage? Support your answer with a graph and economic intuition.arrow_forward
- c) The diagram below shows the supply, demand and marginal expense curve for labor in a monopsony. Given this information, answer the following questions: Wage 1) ii) 111) iv) 3 A B C E H ME S Labor hours per week What quantity of labour will a monopsonist employ? Which region represents the monopsonist total expense for labour? If there were no monopsony, and write an expression using the letter above to represent how much will the total expense of labour increase by. Give a realistic example of a monopsony.arrow_forwardAssume a firm is a monopsonist that can hire its first worker for $6 but must increase the wage rate by $3 to attract each successive worker. Draw the firm’s labor supply and marginal resource cost curves and explain their relationships to one another. On the same graph, plot the labor demand data of question 2. What are the equilibrium wage rate and level of employment? Why do these differ from your answer to question 9?arrow_forwardOn a clearly labeled graph, show what happens to wages paid and employment if the government imposes a payroll tax on a monopsonist? Should the change in wages paid and employment be larger for a monopsonistic labor market or a perfectly competitive one? Explain your answer. Don't copy pastearrow_forward
- On a clearly labeled graph, show what happens to wages paid and employment if the governmentimposes a payroll tax on a monopsonist? Should the change in wages paid and employment be larger for a monopsonistic labor market or a perfectly competitive one? Explain your answerarrow_forwardIf the labor market were a monopsony, would the monopsonist hire more, fewer, or the same number of workers as Que to maximize its profit?arrow_forwardHow should a monopsonist decide how much of a product to buy? Will it buy more or less than a competitive buyer? Explain.arrow_forward
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