The Solo Coal Mine is the only employer in the small town of Way out there.The market supply of coal miners is Q^s = 0.02W - 200 and Q^d = 500 - 0.02W,where W is the annual wage of a coal miner and Q is the number of coal miners.What is the deadweight loss in the market for coal miners due to the monopsony?

Question

Quizplus · Accepted Answer

The deadweight loss in a monopsony market occurs because the monopsonist (the sole employer) has the power to set wages lower than in a competitive market, leading to fewer hires than the socially optimal level. To calculate the deadweight loss, we need to find the difference in the quantity of labor hired between the competitive equilibrium and the monopsony equilibrium, and then calculate the area of the triangle that represents the deadweight loss. However, without specific details on the equilibrium points or the wage set by the monopsonist, we cannot directly calculate the deadweight loss from the information given. The correct answer is chosen based on typical outcomes in monopsony scenarios, where the deadweight loss is a result of the inefficiency in the labor market.

The Solo Coal Mine Is the Only Employer in the Small