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Suppose that one firm is the only employer of a certain labor service (i.e., the firm is a monopsonist). Assume its MRPL is given by L= 11 w and the labor supply is L = W.
(a) What is the wage paid and the number of labor hours hired by the profit maximizing monopsonist?
(b) What would be the wage and number of labor hours if the labor market were perfectly competitive?
(c) If a minimum wage law is passed that requires the monopsonist to pay at least $5.50 per hour, how will this affect employment?
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