Question

In: Economics

Suppose that the output market is in perfect competition with the price of $10 per unit...

Suppose that the output market is in perfect competition with the price of $10 per unit and input market is a monopsony with the following information assuming that labor is the only input. Wage (W)

L MP W MRP TP TR

1 20 20 200 20 200

2 18 40 180 38 380

3 16 60 160 54 540

4 14 80 140 68 680

5 12 100 120 80 800

6 10 120 100 90 900

7 8 140 80 98 980

8 6 160 60 104 1040

9 4 180 40 108 1080

10 2 200 20 110 1100

1. Find TLC, MFC and Profits (with calculation)

Expert Solution

Solution:

Given

the output market is in perfect competition with the price of $10 per unit and input market is a monopsony with the following information assuming that labor is the only input. Wage (W)

1.TLC, MFC and Profits (with calculation) are:

MP = Change in Q / Change in L
MRP = Output price x MP = $10 x MP
TR = Product price x Q = $10 x Q
TLC = Labor Cost = Wage rate x L = $110 x L
MFC = Wage rate = $110
Profit = TR - TC

Table with calculations:

L	MP	MRP ($)	Q	TR ($)	TLC ($) = Wage rate x L = $110 x L	MFC ($) = wage rate value = $110	Profit ($) =TR - TLC
1	20	200	20	200	110 = 110 * 1	110	90 = 200 - 110
2	18	180	38	380	220 = 110 * 2	110	160 = 380 - 220
3	16	160	54	540	330 = 110 * 3	110	210 = 540 - 330
4	14	140	68	680	440 = 110 * 4	110	240 = 680 - 440
5	12	120	80	800	550 = 110 * 5	110	250 = 800 - 550
6	10	100	90	900	660 = 110 * 6	110	240 = 900 - 660
7	8	80	98	980	770 = 110 * 7	110	210 = 980 - 770
8	6	60	104	1040	880 = 110 * 8	110	160 = 1040 - 880
9	4	40	108	1080	990 = 110 * 9	110	90 = 1080 - 990
10	2	20	110	1100	1100 = 110 * 10	110	0 = 1100 - 1100

Rahul Sunny answered 2 years ago

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