B. Consider a fiırm who sells output at p=10 and has a short run production function Q(L)=20L-L². Its wage rate function is w=40+2.5L. 1. Suppose the firm is a monopsonist, how much labor will it hire to maximize profits? 2. How much wage will it pay? 3. Show the graph of the profit-maximizing level of L and w solved in 1&2. 4. Compute for the rate of monopsonistic exploitation and interpret the computed value.
B. Consider a fiırm who sells output at p=10 and has a short run production function Q(L)=20L-L². Its wage rate function is w=40+2.5L. 1. Suppose the firm is a monopsonist, how much labor will it hire to maximize profits? 2. How much wage will it pay? 3. Show the graph of the profit-maximizing level of L and w solved in 1&2. 4. Compute for the rate of monopsonistic exploitation and interpret the computed value.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![B. Consider a fiırm who sells output at p=10 and has a short run production function Q(L)=20L-L². Its
wage rate function is w=40+2.5L.
1. Suppose the fırm is a monopsonist, how much labor will it hire to maximize profits?
2. How much wage will it pay?
3. Show the graph of the profit-maximizing level of L and w solved in 1&2.
4. Compute for the rate of monopsonistic exploitation and interpret the computed value.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc0ca75e-ce2f-47f1-a94e-e3bd5633bed0%2F4d824ddc-76a7-488f-822d-31b16b1655d3%2Fsml8acp_processed.png&w=3840&q=75)
Transcribed Image Text:B. Consider a fiırm who sells output at p=10 and has a short run production function Q(L)=20L-L². Its
wage rate function is w=40+2.5L.
1. Suppose the fırm is a monopsonist, how much labor will it hire to maximize profits?
2. How much wage will it pay?
3. Show the graph of the profit-maximizing level of L and w solved in 1&2.
4. Compute for the rate of monopsonistic exploitation and interpret the computed value.
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