Exam 25: Factor Markets

Rabelaisian Restaurants has a monopoly in the town of Upper Glutton. Its production function is Q = 10L, where L is the amount of labor it uses and Q is the number of meals produced. In order to hire L units of labor, Rabelaisian Restaurants must pay a wage of 10 + .1L per unit of labor. The demand curve for meals at Rabelaisian Restaurants is given by P = 41 - . The profit-maximizing output for Rabelaisian Restaurants is

A profit-maximizing monopsonist hires both men and women to do a certain task. The two sexes are equally good at this task and are regarded as perfect substitutes. Labor supply curves for both sexes are upward sloping. In order to hire M men, the firm would have to pay men a wage of AM, where A is a positive constant. In order to hire F women, the monopsonist would have to pay a wage of BF^c, where B and c are positive constants. Which, if any, of these conditions necessarily implies that the monopsonist pays a lower wage to women than to men?

The labor supply curve faced by a large firm in a small city is given by w = 60 + 0.08L, where L is the number of units of labor per week hired by the large firm and w is the weekly wage rate that it pays. If the firm is currently hiring 1,000 units of labor per week, then the marginal cost of a unit of labor to the firm

A monopsony occurs when two previously competing firms reach an agreement to collude on price.