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National Hospital is the only employer of nurses in the county of Castoria, and it acts as a profit-maximizing monopsonist in the market for nursing labor. The marginal revenue product for nurses is w = 50 2N, where w is the wage rate and N is the number of nurses employed (measure in hundreds of nurses). Nursing services are provided according to the supply schedule w = 14 + 2N .
(a) How many nurses does National Hospital employ, and what wage will National pay its nurses?
(b) What is the deadweight loss arising from monopsony?
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