Here is your assignment 6 This assignment is due Tuesday in class No hand writte
ID: 1227059 • Letter: H
Question
Here is your assignment 6 This assignment is due Tuesday in class No hand written part of the assignment will be graded You are given the following MRP and supply of labor schedules for a monopsonist You may have to do some extra reading to do this assignment. Construct the MFC (marginal factor cost) schedule of the monopsonist What level of employment satisfies monopsonist's rule for profit maximization? Given your answer to b, what wage will the monopsonist pay in order to maximize profit? Suppose that the monopsonist is now confrorted with a minimum wage of $6, 50, construct the MFC schedule associated with this new labor supply schedule Given the minimum wage of $6.50 what level of employment satisfies monopsonist's rule for profit maximization? Given your answer in e, what wage must the monopsonist pay in order to maximize profit? Does this minimum wage cause the monopsonist to increase or decrease the level of employment? Why does the normal interest rate differ from the real interest rate? Under the condition are the two interest rates the same?Explanation / Answer
(a) MFC = Change in Total factor cost (TFC) / Change in workers, where
TFC = Number of workers (L) x Wage rate
(b) Monopsonist maximizes profit by equating MRP with MFC, which occurs at L = 3 (MFC = MRP = $7).
(c) When L = 3, Wage rate = $6
(d)
(e) Now, MFC = MRP = $6.5 when L = 4 and L = 6.
Note: First 5 sub-parts are answered.
L Wage rate ($) TFC ($) MFC ($) MRPL ($) 1 5 5 - 8 2 5.5 11 6 7.5 3 6 18 7 7 4 6.5 26 8 6.5 5 7 35 9 6 6 7.5 45 10 5.5