Find the equilibrium quantity and price under a monopsony

Reference no: EM13695903

Suppose that the market for primary care physicians (PCPs) has monopsony power. The supply of PCPs is Ls= -500+2W, which can be rewritten as W=0.5Ls +250. The marginal cost of PCPs equals MC=Ls +250 and the (inverse) demand for PCPs is : W=(1000/3)-1/3Ld (based on the same direct demand of PCPs written above: Ld= 1000-3W).

a. Find the equilibrium quantity (number of PCPs) and equilibrium price (wage) under a monopsony and numerically quantify how these values compare to the equilibrium quantity (number of PCPs) and equilibrium price (wage) under a perfectly competitive industry. Find the reported shortage of PCPs.

b. Graph the results. Include horizontal and vertical axes and intercepts, equation slopes, equilibrium values and PCP shortage.

Reference no: EM13695903

Questions Cloud

Random variables : Identify the distribution that is most probable for the following random variables:

Pool the risk the best with greater numbers of people : Would it be just be better off if all insurance was administered through the government since it could have everyone on it and pool the risk the best with greater numbers of people?

Build a new office building production facility : Tasty manufacturer is planning to build a new office building production facility. The facility can be built in at reduced capacity now for $40 million and can be expanded 15 years later for an additional $35 million. An alternative is to construct t..

Marginal revenue and marginal cost curves for each market : Where quantities represent the number of prescriptions. Assume that the resale or arbitrage among markets is impossible and that marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1million in the US and 500,000..

Find the equilibrium quantity and price under a monopsony : Suppose that the market for primary care physicians (PCPs) has monopsony power. The supply of PCPs is Ls= -500+2W, which can be rewritten as W=0.5Ls +250. The marginal cost of PCPs equals MC=Ls +250 and the (inverse) demand for PCPs is : W=(1000/3)-1..

Features of a desirable monetary policy instrument : Discuss the key criteria for success and the advantages of a central bank adopting the framework of inflation targeting. Consider the features of a desirable monetary policy instrument. Is the size of the Federal Reserve staff good policy instrument?..

Marketing strategies and organizational designs : Traditionally, many public utility companies (such as telephone & electric service providers) have been highly regulated. Thus, they have operated in stable environments, shielded from competition.

Debts and deficits : Debts and Deficits: Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-financed tax cut on:

Rule based monetary policy : Rule Based Monetary Policy: Below draw an AD/AS graph and a money market graph side-by-side. For the money market, use an upward sloping money supply curve and assume that the equilibrium interest rate in the money market is 5%.

User Account

All Pages