Question

not sure how to answer part d

14.2. The figure below shows the supply of labor, marginal factor costs, and the demand for labor for a firm that is large enough that it is essentially a monopsonist in the community in which it operates. Assume that all workers are paid the same wage and that they work 2,000 hours per year (40 hours a week for 50 weeks). Note: Refer to sections 14.1 & 14.2 in the Principles of Microeconomies 2e if you need assistance with these concepts. MFC IS - - 25 - 1 - LILL- Wazo -4 -- +-it LL - - Wage (dollars per hour) 15 -1T- - ---- ---- | VMPL 10 T At - -1 -t- 1 1 N 5 0 10 20 30 40 50 60 Labor (thousands of workers) What is the total wage hill total wages paid by the firm) for this monopsonistic firm? 1750 million Per 30,000 X12.50 =8375,00 per hour DC 1,800,000,000 per year 2,800.0 #20 x 45,00 liters = $900,00 per hour of $1,050,000,000 year b. If the firm was actually hiring from a competitive labor market, what would be the total wage bill for the firm? We SL: VMPI Х We want the total value of the monopsomistic exploitation of labor by this firm 1,800,000,000 - 750,000,000 d. Is the firm a competitor or a monopolist in the product market?

Answer 1

d. Monopolist.

​​​​​​VMPL is the value of product generated by one additional labor. This is equal to the product of price of good and the marginal product of labor.

​​​​​​In case of perfect competition, VMPL is equal to the wage rate at the level of labor hired. That is, labor is paid exactly equal to the value of the product they generate.

Here, the quantity of labor hired is 30000. At this level, VMPL is 25. But the wage paid to the labor is 12.5. So, wage paid to the labor is lesser than the value of product generated by the labor.

So, the firm is a monopolist in product market.