Question 2 [word limit: 750] Assume a monopsony uses only one factor, i.e. labor, L, to produce a nal good, Q, which is sold in
Question 2 [word limit: 750] Assume a monopsony uses only one factor, i.e. labor, L, to produce a nal good, Q, which is sold in a competitive market at the price p = 1 to maximise prots. The production function of the monopsonist is given by (203) = 100L 2L2. The inverse supply curve for labor is w(L) = 20 + 2 L. a. Derive and describe the monopsony's inverse demand curve for labor. [15 marks]
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