The following figure represents the equilibrium in the labor markets. Figure 14.4 In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
Refer to Figure 14.4.If the government imposes a minimum wage of W₂,how many units of labor will a monopsonist hire?

Question

The following figure represents the equilibrium in the labor markets. Figure 14.4

In the figure,
MFC: Marginal Factor Cost curve
D: Demand or the Marginal Revenue Product curve
S: Supply curve
Refer to Figure 14.4.If the government imposes a minimum wage of W₂,how many units of labor will a monopsonist hire?

Quizplus · Accepted Answer

The monopsonist will hire the quantity of labor where MFC=MRP. At this point, the wage rate will be higher than the marginal cost of labor and the monopsonist will restrict the quantity of labor to maximize profits. When the government imposes a minimum wage of W₂, the wage rate will increase to that level. As a result, the monopsonist will hire Q₃ units of labor, where the MFC curve intersects the supply curve at that level. Thus, the correct choice is D.

The Following Figure Represents the Equilibrium in the Labor Markets