B. Consider a firm 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 firm 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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