How much labour would the nondiscriminating monopsonist hire

Reference no: EM133440735

Assignment:

A monopsonist's demand for labour can be written as VMPE = 80- 0.01ED., where VMPE denotes the value of the marginal product of labour. Labour is supplied to the firm according to w = 20+ 0.02ES, where w denotes the wage.

(a) If the monopsonist were perfectly discriminating, how much labour would the monopsonist hire? How much producer surplus would a perfectly discriminating monopsonist receive?

(b) Assume the monopsonist is nondiscriminating. How much labour does the nondiscriminating monopsonist hire and at what wage? How much producer surplus does the nondiscriminating monopsonist receive?

(c) How much labour would the nondiscriminating monopsonist hire and at what wage if the government imposed a minimum wage of $50? Would total surplus increase or decrease? By how much?

(d) Provide a graphical representation for parts (a) to (c). Make sure to include all relevant labels and values.

Reference no: EM133440735

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