Chapter 29: Q. 29.4. - Learning Objectives (page 648)
Explain how a monopsonist determines how much labor to employ and what wage rate to pay.
Employees are employed by the company. We're trying to hire more women, for example. Monopsony firms pay their employees less than their MRPs.
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Why could unions' desire to obtain collective bargaining exemptions from minimum wage laws provide evidence that few employers are monopsonists? (Hint: Recall the effects of a minimum wage on the employment level of and wage rate paid by a monopsonist.)
Why does a monopsonistic firm pay the last unit of labor that it employs a wage that is less than that unit's marginal revenue product?
Suppose that for the firm in Problem , the goods market is perfectly competitive. The market price of the product the firm produces is at each quantity supplied by the firm. What is the amount of labor that this profit-maximizing firm will hire, and what wage rate will it pay?
A single firm is the only employer in a labor market. The marginal revenue product, labor supply, and marginal factor cost curves that it faces are displayed in the diagram nearby.
Use this information to answer the following questions.
a. How many units of labor will this firm employ in order to maximize its economic profits?
b. What hourly wage rate will this firm pay its workers?
c. What is the total amount of wage payments that this firm will make to its workers each hour?
Explain why, in economic terms, the total income of union membership is maximized when marginal revenue is zero. (Hint: How much more revenue is forthcoming when marginal revenue is equal to zero?')
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