What will be the wage rate and the level of employment

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Reference no: EM13221383

Assume a firm is a monopsonist that can hire its first worker for $6 but must increase the wage rate by $3 to attract each successive worker (so that the second worker must be paid $9, the third $12, and so on). The marginal revenue product of labor is given in the table below.

Units of Marginal
Labor Revenue Product

   0
   1 $34
   2    $28
   3        $24
   4    $20
   5    $14
   6        $10

Drawthe firm's labor supply and marginal resource cost curves.

a. Are the labor supply and MRC curves the same or different? If they are different, which one is higher?

b. What will be the competitiveequilibrium wage rate and the level of employment?

c. What will be the wage rate and the level of employment under monopsonistic conditions?

d. By how much does the monoposonist reduce wages below the competitive wage?

e. By how much does the monopsonist reduce employment below the competitive level?

Reference no: EM13221383

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