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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 29
How would you measure the strength of a monopsonist in an input market? Would a monopsony necessarily be very profitable? What would you need to add to Figure in order to show a monopsonist's profit graphically?
Figure Pricing in a Monopsonistic Labor Market
If a firm faces a positively sloped supply curve for labor (S), it will base its decisions on the marginal expense of labor curve (MEL ). Because S is positively sloped, MEL lies above S. The curve S can be thought of as an average cost of labor curve, and the MEL curve is marginal to S. At L1 the equilibrium condition MEL = MVPL holds, and this quantity will be hired at a market wage rate w1.
Figure Pricing in a Monopsonistic Labor Market
If a firm faces a positively sloped supply curve for labor (S), it will base its decisions on the marginal expense of labor curve (MEL ). Because S is positively sloped, MEL lies above S. The curve S can be thought of as an average cost of labor curve, and the MEL curve is marginal to S. At L1 the equilibrium condition MEL = MVPL holds, and this quantity will be hired at a market wage rate w1.
Explanation
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The strength of a monopsonist in an inpu...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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