Microeconomics 18th Edition by Campbell McConnell, Stanley Brue, Sean Flynn

Exercise 8

Assume a firm is a monopsonist that can hire its first worker for $6 but must increase the wage rate by $3 to attract each successive worker. Draw the firm's labor supply and marginal resource cost curves and explain their relationships to one another. On the same graph, plot the labor demand data of question 2 in Chapter 12. What are the equilibrium wage rate and level of employment What will be the equilibrium wage rate and the level of employment Why do these differ from your answer to question 4
Reference question 2 in Chapter 12 At the bottom of the page, complete the labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market.
a. How many workers will the firm hire if the market wage rate is $27.95 $19.95 Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates.
b. Show in schedule form and graphically the labor demand curve of this firm.
c. Now again determine the firm's demand curve for labor, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at $2.20 per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labor unit. Compare this demand curve with that derived in question 2 b. Which curve is more elastic Explain.