Urban Labor Markets Part II. Suppose we have two cities, A & B. Suppose A's labor market is a complete monopsony, and B's market is perfectly competitive. The labor market for A is given by: Demand : WAd = 25 5 LAd Supply : WAs = 3 + 3 LAs Marginal Cost : MCL = 3 + 6 LAs The labor market in B is given by: Demand : WBd = 25 1 LBd Supply : WBs = 1 + 3 LBs (A) Solve for the monopsonist equilibrium in city A and the competitive equilibrium in city A. Compare them. (There was no typo here, solve for A in the monopsonist and competitive case.)

B) Graphically illustrate that a federally binding (effective, and in both cities) minimum wage can increase employment in city A and decrease employment in city B. You need to draw two labor market graphs here, and carefully label all important component

C ) What minimum wage (place-based or federal) yields the maximum level of overall employ-ment (LA + LB)? Provide both the specific minimum wage and the level of employment it yields.