3. Assume a firm is a monopsonist that can hire its first worker for

$6 but must increase the wage rate by $3 to attract each successive worker (so that the second worker must be paid $9, the third $12, and so on). LO17.3

a. Draw the firm’s labor supply and marginal resource cost curves. Are the curves the same or different? If they are different, which one is higher?

b. On the same graph, plot the labor demand data of review question 2 in Chapter 16. What are the equilibrium wage rate and level of employment?

c. Compare these answers with those you found in problem 2.

By how much does the monopsonist reduce wages below the competitive wage? By how much does the monopsonist reduce employment below the competitive level?