A profit-maximizing monopsonist hires both men and women to do a certain task. The two sexes are equally good at this task and are regarded as perfect substitutes. Labor supply curves for both sexes are upward sloping. In order to hire M men, the firm would have to pay men a wage of AM, where A is a positive constant. In order to hire F women, the monopsonist would have to pay a wage of BF^c, where B and c are positive constants. Which, if any, of these conditions necessarily implies that the monopsonist pays a lower wage to women than to men?

Question

Quizplus · Accepted Answer

If c < 1, the wage function for women, BF^c, increases at a decreasing rate, meaning the wage for women grows slower than the wage for men, AM, as more women are hired. This implies that the monopsonist can pay a lower wage to women than to men.

A Profit-Maximizing Monopsonist Hires Both Men and Women to Do