Dillon owns a small company that sells shirts in a perfectly competitive product market. Dillon is a monopsonist in the labor market, and the table below shows the wages necessary for workers to supply their labor to Dillon's firm.
| Employment |
Wage |
Total Wage Bill (TWB) |
Marginal Wage Cost (MWC) |
| 1 |
10 |
|
|
| 2 |
20 |
|
|
| 3 |
30 |
|
|
| 4 |
40 |
|
|
| 5 |
50 |
|
|
Question A: Calculate Dillon's total wage bill and marginal wage cost in each empty cell for the table above.
Question B: Referring to the table above, by how much does profit change with the hiring of the fourth worker if the marginal revenue product of the fourth worker is $90? $
Question C: Referring to the table above, if minimum wage was implemented by the government and set at a wage of $50, how would profit change for hiring the fourth work with a marginal revenue product of $90? $
Question D: Assume now that the demand for labor is linear and is such that the firm would be willing to hire 1 worker for $70, 2 workers for $60, and so on. Using only the supply information in the table above, what is the monopsonistic level of employment if no minimum wage is applied to the market?
What wage does the monopsonist offer? $
Question E: Using the demand information from Question D, what minimum wage could the government impose that would cause maximum employment in this market? $
What is the final level of employment with this particular wage?