Units of Labor Marginal Revenue
Product
0 na
1 $30
2 $24
3 $18
4 $15
5 $12
6 $10
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). The marginal revenue product of labor is given in the table above.
What will be the competitive equilibrium wage rate?
What will be the competitive equilibrium level of employment?
What will be the wage rate under monopsonistic conditions?
What will be level of employment under monopsonistic conditions?