Question
The aggregate supply of hockey players L as a function of the wage w is given by w(L) = 10 + L There are 6
The aggregate supply of hockey players L as a function of the wage w is given by
w(L) = 10 + L
There are 6 identical hockey teams in the market, and each team is a monopolist in the market for tickets to their own games. The demand curve for hockey tickets for each team is identical and given by
P (q) = 40 3q
The production function for each team is given by q(l) = 3l. That is, every hockey player
where q is the number of tickets sold.
increases the number of tickets sold by 3 units.
1. Assume that the labor market is perfectly competitive.
a) Find each team's labor demand curve.
b) Use this to find the market labor demand curve.
c) Calculate the equilibrium wage and the total number of hockey players hired in the market.
d) Calculate the teams' surplus and the player surplus.
2. Now suppose that the teams form a league and act as a monopsony.
a) Calculate the equilibrium wage and the total number of hockey players hired in the market.
b) Calculate the teams' surplus and the player surplus.
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