Question

1. Welfare loss due to Monopsony Suppose that the supply of Linebackers is given by: w = $3,000 + 1,000L Where w is the wage and L is the number of Linebackers. Given the supply of Linebackers, the marginal factor cost is MFC = $3,000 + 2,000L The marginal revenue Linebackers of the punter can be expressed as. MRP, = $23,000 - 3,000L (a) Suppose that we are in a competitive market. What is the optimal Linebackers (Lc) that will be hired and the corresponding wage (wc)? (10 Points) (b) Find the buyer's surplus under a competitive market.(5 Points) (c) Find the producer's surplus under a competitive market.(5 Points) EconS 321 Economics of Sports in America Page 1 of 2 April 14, 2020 (d) Suppose that we are in a monoponisitic market What is the optimal Linebackers (LM) that will be hired and the corresponding wage (wm)? (10 Points) (e) Find the buyer's surplus under a monoponisitic market.(5 Points) (f) Find the producer's surplus under a monoponisitic market.(5 Points) (g) Find the Dead Weight Loss (DWL) under a monoponisitic market.(10 Points)

Answer 1

Competitive market, Wi 3000 + lood, MRP 23000 - 3000L at ean MRPL - WW, (L = 15) 83000 – 30001 - 3000t 1000L 20000 - 4000L (X - 5 (An) Le 5, We 8000 W 3000+ Scod: 8000(And b) Buyer's Surpios, Then BS=19 x ( 23000 - 8000) X5 = 15000 X 2.5 375000 (An) Producer Surplus - 5000 x 2.5 19,500 = Ans. d) Monopsony : at can MRPL = MFC 23000 - 3000 3000 + 2000 L 20,000 = 5000 L LYM = 4, WM = 3000 + 1000 x 4 - 7000 Cans) wages found from Labour iss Curve.

Surplus e) now Buyer surplus Vax (93000-11,000) x4+ (1000 - 7000) XU Buy MFC MRPL OWL -19 000 x2) +(4000 } x 4 Polucci | - = 24,000 + 16000 40,000 $ (ans) P) Producey Surplus va xux (7000-3000) = = 2 x 4000 $8000 (AN) 9) DWL = 1/ax (11,000 - 7000) x (5-4) = VQ x 4000 XI = 2000 $ (Ans).