Question 6: A monopsony is a similar concept to a monopoly, only it is used to dene a market in which there is only one consumer and many producers. The most common example of a monopsony is a labor market, where there is one employer and many employees. Suppose there is a small Village in Pennsylvania whose sole employer is a mining company called 'Pitt Steelers'. All Villagers in this area either go and work for the mining company, or they do not work at all. Pitt Steelers has the following total expenditure function E : w(L)L, where w : w3(L) : L + 10 is a wage given by a market labor supply curve. Pitt Steelers has a demand for labor is given by wd(L) = 20 L. . With 11) on the y axis, and L on the x axis, graph out the market supply and demand for labor. . Find the marginal expenditure function for Pitt Steelers (hint: ME : w3(L) + iiiEL, this is an upward sloping curve). Add this function to your graph. . How much labor should Pitt Steelers hire and what wage rate would they set? (hint: This is very similar, but not the same, as how you would work a monopoly problem. You'll need to use ME : wd(L) and plug in L* into the labor supply function). . Show this point on your graph, as well as producer and consumer surplus, and deadweight loss. . Suppose the Villagers go on strike and demand a minimum wage. Show the effects of the minimum wage on your graph. How does this affect producer and consumer surplus, and deadweight loss