Suppose the demand faced by a labor monopsony is W = 40,000 - 100l, where W is the annual wage and L is the number of workers hired. The labor supply is given by W = 10,000 + 100l. The marginal expenditure equation is W = ____.

Question

Quizplus · Accepted Answer

The marginal expenditure (ME) for a monopsony is derived from the labor supply equation. The labor supply equation is W = 10,000 + 100l. To find the ME, we differentiate this equation with respect to l and then add the result to the original equation. Differentiating 100l gives 100, so when added to the original equation, it doubles the slope: ME = 10,000 + 200l.

Suppose the Demand Faced by a Labor Monopsony Is W