What wage when there is no minimum wage

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A monopsonist’s demand for labor can be written as VMPE = 40 – 0.004ED. Labor is supplied to the firm according to w = 5 + 0.01ES. Thus, the firm’s marginal cost of hiring workers when it hires off of this supply schedule is MCE = 5 + 0.02ES. (a) How much labor does the monopsony firm hire and at what wage when there is no minimum wage? (b) How much labor does the monopsony firm hire and at what wage when it must pay a minimum wage of $25?

Reference no: EM13888605

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