TABLE 14 - them it must offer the higher $20 wage to its...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
TABLE 1 A Monopsonist's Marginal Cost of Labor Labor (number of workers) Wage (per hour) Total cost of labor Marginal cost of labor 1 $10 $10 $10 2 15 30 20 3 20 60 30 4 25 100 40 5 30 150 50 Suppose the monopsonist wants to increase the number of workers that it hires from 2 to 3. In order  to attract the third worker, the monopsonist must offer an hourly wage of $20 instead of $15.  However, because the monopsonist cannot discriminate among its workers (and risk alienating 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: them), it must offer the higher $20 wage to its two current employees. Hence, the monopsonist's costs from hiring the third worker are $60 (3 × $20), and the marginal cost from hiring the third worker is $30 ($60 − $30). The marginal cost of $30 exceeds the new market wage of $20 because the monopsonist must also pay its two current employees an hourly wage that is $5 higher than before....
View Full Document

This note was uploaded on 11/19/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online