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II. A firm is a monopsony in the input market and a perfect competitor in the output market. Its production function is y = x
II. A firm is a monopsony in the input market and a perfect competitor in the output market. Its production function is y = x (20 x) /2, for 0 x 10. The supply curve of the input is S : w =1+ x and the price of the output is p = 1.
a) Find the quantity of input the firm will hire and the input price w it will pay. How would you define the deadweight loss here and what would its value be?
b) What will the values of x and w be if the government sets the minimum price w = 5.5? Answer also the same questions with w = 7.
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