3. A monopsonist's inverse demand for labor can be written as D-(w) = VMP(E) = 40 – 0.005ED. Labor is supplied to the firm according to the inverse supply function S-(w) = s(E) = w = 5+0.01E,. %3D (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?
3. A monopsonist's inverse demand for labor can be written as D-(w) = VMP(E) = 40 – 0.005ED. Labor is supplied to the firm according to the inverse supply function S-(w) = s(E) = w = 5+0.01E,. %3D (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?
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: The Markets For The Factor Of Production
Section: Chapter Questions
Problem 3PA
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Transcribed Image Text: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.
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