Question

Assume a labor market with a non-discriminating monopsony. Assume the wage is 5$ when
monopsony employs 100 workers. Assume wage increase to 5,1$ when 1 more worker is employed. What is the marginal labor cost of the last worker?

Answer 1

• Monopsony market is market place where a firm has market power in employing factors of production (Land, Labour, Capital and Entrepreneurship.)
• It is operating same as in the monopolistic market.
• In monopolistic market there is one seller and many buyers, in monopsony market there is more sellers and only one buyer.

$Wage = 100 \times \$5$

$= \boxed{\$500}$

wage will increase by $5.1 when one more worker employed

No of workers 101

$Wage = 101 \times \$5.1$

$= \boxed {\$ 515.10}$

Extra wage payment $= \$515.10 - \$500$

$= \boxed {\$15.10}$

The marginal cost of the last labour or worker is $\boxed{\$15.10}$