Intermediate Microeconomics · free preview
Factor Markets and Monopsony
Firms hire where the marginal revenue product meets the factor's marginal cost, monopoly's MRP bending with MR, and a monopsony facing an upward labor supply, the worked market hiring 6.7 at wage 13.3 against the competitive 10 at 20, the marginal cost of labor above the supply, and a minimum wage able to raise both wage and employment.
1. Hiring by the product
Hiring by the product
2. The single buyer
The single buyer
3. The competitive benchmark
The competitive benchmark
4. Countervailing power
Countervailing power
5. The MRP rule
What is the marginal revenue product of labor?
6. The monopsony's marginal cost
Why does the marginal cost of labor lie above the supply curve?
7. The monopsony outcome
Solve 4L equals 40 minus 2L for the monopsony hiring and wage.
8. The minimum-wage reversal
Why can a minimum wage raise employment in the monopsony town?
9. The competitive wage
Solve 2L equals 40 minus 2L for L, then compute the wage 2L. Write the wage.
10. The wage gap
Compute the gap between competitive and monopsony wages, 20 minus 13.3, and write the number to one decimal.
11. The marginal check
At the monopsony employment of 6.67, what does the marginal revenue product read?
12. A well-aimed minimum wage
A minimum wage of 15 is imposed on the monopsony town. What happens to employment?
13. The exploitation wedge
Workers are paid 13.3 while their marginal revenue product is 26.7. What is the per-worker wedge?
14. Countervailing power
How does a union restore the balance in the monopsony town?
15. The marginal product at monopsony
With MRP equal to 40 minus 2L, compute the MRP at L of 6.67, and write the number to one decimal.
16. Employment under the floor
With a flat labor cost of 15 and MRP 40 minus 2L, solve 40 minus 2L equal 15 for L, and write the number to one decimal.
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