Assume that Company X is a monopsony in a small town. It faces the upward sloping market
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Question:
Assume that Company X is a monopsony in a small town. It faces the
upward sloping market supply of labor, given by w(L): Further assume
that it sells its good in a perfectly competitive product market at $P
per unit. The production uses labour only and marginal product of
labour MPL is decreasing in L:
Suppose Company X is able to practice the FIrst-degree wage dis-
crimination. What is the employment level in this case? Identify
it in the same graph. Is there any deadweight loss?
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