Consider a monopsonist in the labor market. Let the labor supply be given by L = 4w, where L is the employment level, and w is the wage rate. Suppose that the monopsonist has the production function F(L) = √ L. The monopsonist can sell its output at a price of one.
(a) What is the marginal value and marginal expenditure of the monopsonist as a function of the employment level?
(b) What is the wage rate and employment level under monopsony?
(c) What is the deadweight loss of monopsony?
(d) What minimum wage rate would result in an efficient employment level?