Question

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

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

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.