Exhibit 27-8

Refer to Exhibit 27-8. If the monopsonist could perfectly discriminate by paying each worker a different wage rate, the number of workers employed would be

Question

Exhibit 27-8 ​

Refer to Exhibit 27-8. If the monopsonist could perfectly discriminate by paying each worker a different wage rate, the number of workers employed would be

Quizplus · Accepted Answer

With perfect wage discrimination, the firm can hire as many workers as it wants at different wage rates. This means that the firm can hire all workers up to the point where the marginal cost of labor (MCL) equals the value of the marginal product of labor (VMPL) for each worker. From the graph, we can see that the MCL curve intersects the VMPL curves for each worker at point U1. Therefore, the monopsonist would hire all workers up to point U1 for each VMPL curve, resulting in a total employment of Q₅.

Exhibit 27-8 ​ Refer to Exhibit 27-8. If the Monopsonist Could Perfectly Discriminate

Exhibit 27-8 Refer to Exhibit 27-8. If the Monopsonist Could Perfectly Discriminate