Question

Assume that a large firm buys all the farms in northern Florida and becomes the only employer of farm workers in the northern half of the state.

1. 
   
2. Explain how the competitive labor market functioned before the buyout of the independent farms. How was the wage rate and quantity of workers employed in the market determined?
3. 
   
4. What will happen to the wage rate and employment of farm workers after the industry becomes monopsonistic? Illustrate your answer with an appropriate graph.
5. 
   
6. What is MRC? Why is MRC a part of the monopsony graph and not a part of the perfectly competitive labor market graph?

Answer 1

Answer: The large a Faida and firm buys all the form in nothan becomes the only employer of in the northern half of the state form workers @ The competitive labor market functioned beffe buyout of the independent forms. the wage rate and quantity of workers employed in the market determined. The wage rate is equilised with UMPL to determine the quantity of labor employed. This is in competitive labor market . wage rate is determined by supply and demand for labol. ② The wage rate and employment of farm workers after the industry becomes monopsoriatic.

In figure B wage rate falls to w and employment of labor falls from Lit tol . Here MRC is equated With UMPL curve but Wage is paid according - to SL curve. ① The monopsony ctly competitive part of the graph and not a labor market graph. perfe The MRC is difference in total cost at successively higher levels of employment of factor It's not a part & perfect competitive market because thore every unit of labor is paid Same (W) whereas in monopsony market the cost of labor rises as employment of labor rises.

Umph 3 18 SL - UMPL MRC MRC