Suppose Guillen Co., a company producing baseballs, has monopsony power. Assume you are given the following information for Guillen Co. You must show all of your work where calculations are required and you must include a brief explanation of approximately 50 words for written answers to receive full credit:
|
Units of Labor (L)
|
Wage Rate (w)
|
Total Labor Costs (TLC)
|
Marginal Resource (Labor) Cost (MRC)
|
Marginal Revenue Product (MRP)
|
|
0
|
$0
|
$0
|
--
|
--
|
|
1
|
$6
|
|
|
$39
|
|
2
|
$8
|
|
|
$38
|
|
3
|
$10
|
|
|
$35
|
|
4
|
$12
|
|
|
$32
|
|
5
|
$14
|
|
|
$29
|
|
6
|
$16
|
|
|
$26
|
|
7
|
$18
|
|
|
$23
|
|
8
|
$20
|
|
|
$20
|
|
9
|
$22
|
|
|
$17
|
a. Write down the formulas for TLC and MRC and then fill in the columns in the table above for TLC and MRC.
b. Based on the data above and using the MRP = MRC Rule, find the profit maximizing units of labor the monopsony would hire (L*) and the wage rate (w*) the monopsony would pay. How do you know?
c. If instead, this were a perfectly competitive labor market, how many workers would be hired, and what would the perfectly competitive market wage rate be? How do you know?