Labor is supplied by competitive suppliers and everywhere


A firm produces output, measured by Q, which is sold in a market in which the price is 4, regardless of the size of Q. The output is produced using only one input, labor (measured by L); the production function is Q(L) = 10L. Labor is supplied by competitive suppliers, and everywhere along the supply curve the elasticity of supply is 3. The firm is a monopsonist in the labor market. What wage rate will it pay its workers?

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Econometrics: Labor is supplied by competitive suppliers and everywhere
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