Exhibit 11-13 A monopsonist's supply and marginal revenue product data

Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?

Question

Exhibit 11-13 A monopsonist's supply and marginal revenue product data

Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?

Quizplus · Accepted Answer

The monopsonist will hire workers up to the point where the marginal cost of hiring an additional worker equals the marginal revenue product of that worker. In Exhibit 11-13, we can see that the marginal revenue product of the first worker hired is $20, and this decreases as more workers are hired. The cost to the monopsonist of hiring the first worker is $8, and this increases as more workers are hired. The monopsonist will therefore hire workers up to the point where the marginal cost of the last worker hired (in this case, the fourth worker) equals the marginal revenue product of that worker. From the table, we can see that the marginal cost of the fourth worker is $12, and the marginal revenue product of the fourth worker is also $12. Therefore, the monopsonist will hire four workers and pay each worker a wage rate of $12, which is the wage rate where the marginal cost of hiring an additional worker and the marginal revenue product of that worker are equal.

Exhibit 11-13 a Monopsonist's Supply and Marginal Revenue Product Data