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- Suppose that the supply curve for the labour to a firm is given by L = 100w
- and the marginal expense of labour curve is given by MEL =L/50
- where w is the market wage. Suppose also that the firms demand for labour (marginal revenue product) curve is given by
- L = 1, 000 − 100MRPL.
- a) If the firm acts as a monopsonist, how many workers will it hire in order to maximise profits? What wage will it pay? How will this wage compare to the MRPL at this employment level?
- b) Assume now that the firm must hire its workers in a perfectly competitive labour market. How many workers will the firm hire now? What wage will it pay?
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