Question
Labour Demand with Monopsony in the Labour Market and Monopoly in the Output Market. You are the manager of a business that operates as a
Labour Demand with Monopsony in the Labour Market and Monopoly in the Output Market.
You are the manager of a business that operates as a Monopolist in the output market, and it is a Monopsonist in the local labour market. The production function of the business is given by: Q = L In the production function, Q is output, L is the number of workers employed, As a Monopolist, the firm faces a market demand given by: P = - Q
As a Monopsonist the firm faces a supply of labour given by the expression: w = L
a) Calculate the equilibrium number of units of labour employed in short run.
b) Briefly discuss the advantages for a firm of being a Monopolist in the output Market and a Monopsonist in the Labour Market.
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