The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia,with only one employer,a logging company.
FIGURE 14- 4
-Suppose we have a labour market with a monopsony employer in a town.Now suppose that all workers form a union and negotiate a wage that is equivalent to what the wage would have been in a competitive market.What is the profit- maximizing condition for the firm?
A) Hire the number of workers such that the MR of the firm's product equals the MC of the final worker hired.
B) Hire the number of workers such that the MC of the final worker hired equals the union- set wage.
C) Hire the number of workers such that the MRP of the final worker hired equals the union- set wage.
D) Hire the number of workers such that the MR of the firm's product equals the MRP of the final worker hired.
E) Hire the number of workers such that the MRP of the final worker equals the monopsony equilibrium wage.
Correct Answer:
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