Calculate change in welfare compared to free market outcome

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Reference no: EM13155950

A monopsonic Fast Food Chain exhibits a demand for labor given by w=210-3L, where wdenotes the wage and L the quantity of labor hired. Workersâ€^TM labor supply is given by w=2L+7.

(a) Calculate the profit maximizing labor demand and the resulting wage paid for the monopsonistic firm.

(b) Calculate the welfare loss compared to the competitive outcome.

(c) If the government imposed a minimum wage of w=70, what would be the resulting quantity of labor employed, the wage, and the welfare loss. Also, calculate the change in welfare compared to the free market outcome (i.e., in the absence of minimum wages). Is this a welfare gain or a loss?

Reference no: EM13155950

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