Question

The graph below shows a monopsony labor market. In the absence of any regulations, which of the following represents the number of workers the firm will hire and the wage rate it will offer to those workers? 2 60 Marginal Factor Cost 50 45 40 35 30 25 20 15 10 Supply of Labor Marginal Revenue Product 0 5 10 15 20 25 30 35 40 45 50 55 60 NUMBER OF WORKERS PER DAY Number of Workers 15; Wage Rate $30 Number of Workers-20; Wage Rate $20 Number of Workers- 20; Wage Rate- $40 Number of Workers-30; Wage Rate $30 Number of Workers-40; Wage Rate $40

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Answer #1

Answer is option B)

In monopsony, at equilibrium MFC( marginal factor cost) & MRP(marginal revenue product) are equal.

Thus two cut when Labor equals 20

Now the wages are found on Labor supply curve, corresponding to 20 units of Labor, wages equals to 20 .

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