Assume 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 (so that the second worker must be paid $9, the third $12, and so on). The marginal revenue product of labor is given in the table below. Marginal Revenue Product Units of Labor 1 $30 24 3 18 4. 15 12 6 10 a. Draw the firm's labor supply and marginal resource cost curves.
Assume 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 (so that the second worker must be paid $9, the third $12, and so on). The marginal revenue product of labor is given in the table below. Marginal Revenue Product Units of Labor 1 $30 24 3 18 4. 15 12 6 10 a. Draw the firm's labor supply and marginal resource cost curves.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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What is the equilibrium wage rate and the equilibrium level of employment?
Transcribed Image Text:Assume 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 (so that the second worker must be paid $9, the third $12, and so on). The marginal revenue product of labor is given in the table below.
| Units of Labor | Marginal Revenue Product |
|----------------|--------------------------|
| 0 | — |
| 1 | $30 |
| 2 | 24 |
| 3 | 18 |
| 4 | 15 |
| 5 | 12 |
| 6 | 10 |
a. Draw the firm's labor supply and marginal resource cost curves.
**Instructions:**
1. Use the tool provided 'LS' to draw the labor supply curve (plot 6 points total).
2. Then use the tool provided 'MRP' to draw the marginal revenue product curve (plot 6 points total).
3. Finally, use the tool provided 'MRC' to draw the marginal resource cost curve (plot 6 points total).
To earn full credit for this graph, you must plot all required points for each curve.
Transcribed Image Text:### Understanding Monopsonistic Conditions in Labor Markets
When analyzing labor markets, it's important to consider how monopsonistic conditions affect wage rates and employment levels.
1. **What is the wage rate under monopsonistic conditions?**
- Input field for response.
2. **What is the equilibrium level of employment under monopsonistic conditions?**
- Input field for response.
3. **By how much does the monopsonist reduce wages below the competitive wage?**
- Input field for response.
4. **By how much does the monopsonist reduce employment below the competitive level?**
- Input field for response.
These questions help in understanding the implications of monopsony, where a single buyer (employer) substantially controls the market dynamics, potentially leading to lower wages and reduced employment compared to competitive markets.
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