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Answered Same Day May 28, 2020


Deepika answered on May 28 2020
142 Votes
Ans 1. The equili
ium quantity of labour the firm will employ (qe) = 24 people/yea
Because the employer is a monopsonist and equili
ium is established where the marginal factor cost of labour (MFCL) is equal to its marginal revenue product.
At this equili
ium quantity of labour,
(a) MRPlabour = $1.2m/person/yea
(b) MFClabour = $1.2m/person/yea
Ans 2. The equili
ium wage paid by the firm (we) = $0.8m/person/yr (Determined by dropping a vertical line from the intersection of MRP curve and MFC curve to the supply curve)
wage rate under monopsony is smaller than the value of marginal...

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