skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

Carl the clothier owns a large garment factory on an isolated island. Carls factory is the only source of employment for most of the islanders, and thus Carl acts as a monopsonist. The supply curve for garment workers is given byl = 80w,wherel is the number of workers hired and w is their hourly wage. Assume also that Carls labordemand (marginal revenue product) curve is given byl = 400 – 40MRPl.a. How many workers will Carl hire to maximize his profits, and what wage will he pay?b. Assume now that the government implements a minimum wage law covering all garmentworkers. How many workers will Carl now hire, and how much unemployment will there beif the minimum wage is set at $4 per hour?c. Graph your results.d. How does a minimum wage imposed under monopsony differ in results as compared with a minimum wage imposed under perfect competition? (Assume the minimum wage is above themarket-determined wage.)
Solution:- a) L=400-40MVPL MVPL = 10 1/40L MVPL=MRPL=MFCL>AFCL implies MVPL=MEL 10-1/40L = 1/40L L= 200 Supply curve for government workers :- L = 80W 200=80w W=200/80=2.5 b) The government implements a minimum wage law covering all government workers. For Carl, the MEL now equals the minimum wage and in equilibrium the MEL will equal the MRPL. MVPL=MRPL=MEL=Wm i) If the minimum wage is set at $# per hour. MVPL = MEL = Wm = 3 L=400-40MVPL L=400-40(3)=280 L=80W= L=80*3=240 Carls demand = L=280 Supply= L=240 Demand>supply ii) If the minimum wage is set at $3.33 per hour Carls demand:- L=400-40MVPL L=400-40(3.33)…

67 Carls Supply:- L=80W L==80*3.33 L=267 Demand = supply iii) If the minimum wage is set at $4 per hour Carls demand:- L=400-40*4 L=240 Carls Supply:- L=80W L=80*4 L=320 Supply>demand c) d) Under perfect competition, a minimum wage means higher wages but fewer workers employed. Under monopsony, a minimum wage may result in higher wages and more workers employes as shown by some of the cases studied in part b.


Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®

Back To Top