Production and Price for a Monopsonist

Workers

Wage Rate

Total Labor Cost

Marginal Factor Cost (MFC)

Marginal Revenue Product (MRP)

0

$9

0

---

---

1

$11

(A)

(G)

$35

2

$13

(B)

(H)

$32

3

$15

(C)

(I)

$29

4

$17

(D)

(J)

$26

5

$19

(E)

(K)

$23

6

$21

(F)

(L)

$20

The table describes the costs and MRP for a monopsonist. Use the table above. Assume the monopsonist wants to hire 3 total workers. What wage rate should this monopsonist offer to attract those 3 workers?

Note: enter answer with only numerical values and round up to the nearest tenth. For example, if you think the answer is "$101.58" then enter the answer "101.6" in the space below.

Question

Production and Price for a Monopsonist

Workers

Wage Rate

Total Labor Cost

Marginal Factor Cost (MFC)

Marginal Revenue Product (MRP)

0

$9

0

---

1

$11

(A)

(G)

$35

2

$13

(B)

(H)

$32

3

$15

(C)

(I)

$29

4

$17

(D)

(J)

$26

5

$19

(E)

(K)

$23

6

$21

(F)

(L)

$20

The table describes the costs and MRP for a monopsonist. Use the table above. Assume the monopsonist wants to hire 3 total workers. What wage rate should this monopsonist offer to attract those 3 workers?

Note: enter answer with only numerical values and round up to the nearest tenth. For example, if you think the answer is "$101.58" then enter the answer "101.6" in the space below.

BlackTom AI · Accepted Answer

The problem presents a monopsonist facing a labor schedule with Wage Rate, Total Labor Cost, Marginal Factor Cost (MFC), and Marginal Revenue Product (MRP) for hiring up to 6 workers. The key concept here is that a monopsonist hires workers up to the point where the wage it must pay to attract the next worker aligns with the number of workers it hires, i.e., the wage associated with that workforce level.

First, identify how many workers the question asks for: 3 workers in total. In this setup, the wage rate you must offer to attract exactly 3 workers is the wage corresponding to hiring 3 workers, i.e., the wage in the row where the number of workers is 3.

Examining the Wage Rate column for each incremental level:
- 1 worker requires a wage of 11
- 2 workers require a wage of 13
- 3 workers require a wage of 15
- 4 workers require a wage of 17
- 5 workers require a wage of 19
- 6 workers require a wage of 21

Thus, to attract three workers, the monopsonist would set the wage at 15.

Now, why this makes sense conceptually: in a monopsony, the firm faces an upward-sloping labor supply curve, so hiring more workers means offering higher wages. To hire exactly 3 workers, you offer the wage that corresponds to that level of employment, which is the wage rate at 3 workers (15). The MFC values (9, 11, 13, 15, 17, 19, 21) indicate that the extra cost of hiring each additional worker rises, but the monopsonist still chooses the employment level where the required wage aligns with the desired headcount. The MRP values (35, 32, 29, 26, 23, 20) show the additional revenue from each worker; since the firm is selecting an employment level, it compares MRP with MFC to determine a profitable hires, but the question specifically asks for the wage rate to attract 3 workers, which is simply the wage at that level.

If you were to consider other hypothetical headcounts: hiring fewer than 3 would mean offering a lower wage corresponding to 1 or 2 workers (11 or 13), while hiring more than 3 would require a higher wage (17 for 4 workers, etc.). However, the prompt asks for exactly 3 workers, so the correct wage is 15.

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