Homework Answers
a) 200 hours. This is found by using ME = D where the monopsonist equates marginal factor cost with the demand instead of using demand and supply
b) Firm will pay a relatively lower wage rate at $10 per hour found by using the labor supply curve for 200 labor hours
c) DWL = 0.5*(competitive quantity of labor - monopsony quantity of labor)*(wage rate at ME = D - wage rate of monopsony) = 0.5*(300 - 200)*(20 - 10) = $500
d) It is shown below
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