A monopsony has a marginal revenue product curve of MRP_L = 100 - l and faces a labor supply curve of W = 1.5l. How many workers will the monopsony hire?

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Quizplus · Accepted Answer

A monopsony hires workers where MRP_L = MCL (marginal cost of labor). The labor supply curve is W = 1.5l, so the total cost is TC = 1.5l^2/2. The MCL is the derivative of TC, which is 1.5l. Setting MRP_L = MCL gives 100 - l = 1.5l, solving for l gives l = 25.

A Monopsony Has a Marginal Revenue Product Curve of MRPL

A Monopsony Has a Marginal Revenue Product Curve of MRP_L