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Question: The only legal employer of military soldiers in the United States is the federal government. If the government uses its knowledge of its monopsonistic position, what criteria will it employ when determining how many soldiers to recruit? What happens if a mandatory draft is implemented?

Short Answer

Expert verified

The federal government will hire soldiers till the marginal value of the last soldier is equal to the payment made to them. After the draft is implemented, wages for volunteer soldiers will fall.

Step by step solution

01

Explanation

The federal government in the United States behaves as a monopsonist; it will hire soldiers till the marginal value of the last soldier is equal to the payment made to the last soldier. The monopsony power of the government will lead to hiring fewer soldiers and paying less to the soldier.

After the mandatory draft is implemented, the soldier with less expertise will be employed, and the volunteer soldiers will be paid less, as the wages of the draftees can be low enough. Hence, the number of soldiers hired will increase than the volunteer system.

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Most popular questions from this chapter

Question: The demands for the factors of production listed below have increased. What can you conclude about changes in the demands for the related consumer goods? If demands for the consumer goods remain unchanged, what other explanation is there for an increase in derived demands for these items?

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The demand for labor by an industry is given by the curve L = 1200 - 10w, where L is the labor demanded per day and w is the wage rate. The supply curve is given by L = 20w. What is the equilibrium wage rate and quantity of labor hired? What is the economic rent earned by workers?

Using your knowledge of marginal revenue product, explain the following:

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Question: Suppose that the wage rate is \(16 per hour and the price of the product is \)2. Values for output and labor are in units per hour.

q

l

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0

20

1

35

2

47

3

57

4

65

5

70

6

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  2. Suppose that the price of the product remains at \(2 but that the wage rate increases to \)21. Find the new profit-maximizing level of L.

  3. Suppose that the price of the product increases to \(3 and the wage remains at \)16 per hour. Find the new profit-maximizing L.

  4. Suppose that the price of the product remains at \(2 and the wage at \)16, but that there is a technological breakthrough that increases output by 25 percent for any given level of labor. Find the new profit-maximizing L.

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