Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

تمرين 23

In Chapter 11, we showed the relationship between marginal revenues and market price for a monopoly to be given by
where e is the price elasticity of demand for the product. For a monopsony, a similar relationship holds for the marginal expense associated with hiring more labor:
where e is the elasticity of supply of labor to thefirm. Use this equation to show
a. that for a firm that is a price taker in the labor market, ME = w;
b. that ME w for a firm facing a labor supply curve that is not infinitely elastic at the prevailing wage; and c. that the gap between ME and w is larger the smaller e is.Explain all of these results intuitively.