Calculate the welfare loss compared to competitive outcome

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Reference no: EM13156105

A monopsonic Fast Food Chain exhibits a demand for labor given by w=210-3L,Ã‚ where wdenotes the wage and L the quantity of labor hired. WorkersÃ¢â‚¬â„¢ labor supply isÃ‚ given by w=2L+7.

(a) Calculate the profit maximizing labor demand and the resulting wage paid for theÃ‚ 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,Ã‚ the wage, and the welfare loss. Also, calculate the change in welfare compared to theÃ‚ free market outcome (i.e., in the absence of minimum wages). Is this a welfare gain or a loss?

Reference no: EM13156105

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