Use the following to answer question(s): Minimum Wage and Monopsony

-(Exhibit: Minimum Wage and Monopsony) In the absence of a minimum wage, the monopsony firm in the exhibit would maximize profits by hiring _______ units of labor per period, and setting the wage at _______ .

Question

Use the following to answer question(s): Minimum Wage and Monopsony
 
-(Exhibit: Minimum Wage and Monopsony) In the absence of a minimum wage, the monopsony firm in the exhibit would maximize profits by hiring _______ units of labor per period, and setting the wage at _______ .

Quizplus · Accepted Answer

In a monopsony, a single buyer (employer) in the labor market maximizes profits by equating marginal labor cost (MLC) with marginal revenue product (MRP). The profit-maximizing quantity of labor is where MLC intersects MRP, which is at L₁. The wage corresponding to L₁ is determined by the labor supply curve, which is at $20.

Use the Following to Answer Question(s): Minimum Wage and Monopsony