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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