Assume that Wal-mart is the only employer of retail workers in a small town in Indiana. As a local non-discriminating monopsonist, Wal-mart faces a labor supply curve given by: E = 10W –100, where E is the number of workers hired each hour and w is the hourly wage rate. Assume, the production function for Wal-Mart retail workers is given by Q=7E. Where the output (Q) has a price of $20 per unit in a perfectly competitive output market.
a. Find Wal-Mart’s Total Labor Cost and Marginal Cost.
b. Find Wal-Mart’s Marginal Cost
c. Find Wal-Mart’s Marginal Product of labor
d. Find Wal-Mart’s Value of the Marginal Product of labor
e. Find Wal-Mart’s profit maximizing level of employment, and the corresponding level of output.
f. Find Wal-Mart’s wage offer and Monopsonistic Exploitation.