Asksia AI LOGO

Sia

Question
Macroeconomics
Posted 10 months ago

A factory that makes hot glue guns hires labor in a monopsonistic competitive labor market. This graph illustrates the firm's marginal factor cost of labor (MFC_L), marginal revenue product of labor (MRPL)\left(M R P_{L}\right), and the supply of labor (SL)\left(S_{L}\right).

What wage and quantity combination will this firm choose to maximize profits?

Choose 1 answer:
(A) 400 workers, $80\$ 80 per day
(B) 200 workers, $40\$ 40 per day
(C) 400 workers, $50\$ 50 per day
(D) 200 workers, $50\$ 50 per day
(E) 200 workers, $60\$ 60 per day
Sign in to unlock the answer
Answer from Sia
Posted 10 months ago
Solution
a
Profit Maximization in Monopsony: A monopsonistic firm maximizes profits by hiring workers up to the point where the Marginal Revenue Product of Labor (MRP_L) equals the Marginal Factor Cost of Labor (MFC_L)
b
Intersection Point: The firm will choose the wage and quantity combination where the MRP_L curve intersects the MFC_L curve. This point represents the profit-maximizing quantity of labor
c
Optimal Choice: Given the options, the firm will choose the combination that corresponds to the intersection of MRP_L and MFC_L
Answer
(B) 200 workers, $40 per day
Key Concept
Monopsonistic Profit Maximization
Explanation
In a monopsonistic labor market, the firm maximizes profits by hiring the number of workers where the MRP_L equals the MFC_L, which corresponds to the intersection of these two curves on the graph.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Unlock Smarter Learning with AskSia Super!

Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.

30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question