TABLE 14

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

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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
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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....
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## 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.

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