The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-According to Figure 14.6, if the government imposes a minimum wage of $15, what quantity of labor will a competitive firm and a monopsonist, respectively, hire?
A)50 and 25
B)50 and 75
C)75 and 125
D)125 and 250
E)50 and 125

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
 
-According to Figure 14.6, if the government imposes a minimum wage of $15, what quantity of labor will a competitive firm and a monopsonist, respectively, hire?
A)50 and 25 
B)50 and 75 
C)75 and 125 
D)125 and 250 
E)50 and 125

Quizplus · Accepted Answer

In a competitive market, firms hire where the market wage equals their marginal revenue product of labor. A minimum wage of $15 would intersect the demand curve at a quantity of labor of 50. In a monopsony, the firm hires where the marginal expense curve intersects the new minimum wage line, which would be at a quantity of 125.

The Figure Given Below Represents Equilibrium in the Labor Market