APPENDIX QUESTIONS AND PROBLEMS

Question 11.19

1. This figure 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).

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  1. What is the total wage bill (total wages paid by the firm) for this monopsonistic firm?

  2. If the firm was actually hiring from a competitive labor market, what would be the total wage bill for the firm?

  3. What is the total value of the monopsonistic exploitation of labor by this firm?

  4. Is the firm a competitor or a monopolist in the product market?

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Question 11.20

2. Would unions be more likely to organize successfully in highly competitive markets or in markets with monopsony power? Explain.