Question
A firm faces perfectly elastic demand for its output at a price of $10 per unit of output. The firm is a monopsonist facing the
A firm faces perfectly elastic demand for its output at a price of $10 per unit of output. The firm is a monopsonist facing the upward-sloping labor supply curve L = 2W - 400, L denoting man-hours of labor and W the hourly wage. This implies that the firm faces the upward-sloping marginal cost of labor curve
MCL = L + 200. Each man-hour of labor produces 50 units of output.
(a) How many man-hours of labor must the firm hire to maximize profit?
(b) What wage per man-hour must the firm pay when it hires the profit-maximizing quantity of labor?
(c) How much is the firm's maximum profit per hour?
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International Economics
Authors: Thomas Pugel
16th Edition
0078021774, 9780078021770
