10+Labor

A beginning diagram is shown below.

The initial diagram depicts a supply and demand curve for labor. In the first layer draw perpendiculars to represent the perfectly competitive wage (W1) and the number of hired workers (Q1). In a new layer draw the Marginal Factor Curve for a monopsonist. Label the resulting wage rate (Wo) and the number of hired workers as (Qo).

Upload the completed diagram to this Wiki page, then in the explanation field explain how a minimum wage set at the perfectly competitive outcome would increase the wage rate and employment level as compared to the outcome if the market were dominated by a monopsonist.

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 * Num || Name || Diagram ||  ||
 * 1 || Sally Smith

A profit maximizing monopsony will hire labor at the point on the supply curve where MFC = MRP. This point is labeled "Wage paid by Monopsony". The profit maximizing perfectly competitive firm will hire labor at the point where supply = demand. This point is labeled "Wage paid by Perfectly Competitive market". A monopsony hires fewer workers at a lower rate, and is less efficient, compared to a competitive market so setting a price control or minimum wage, where supply = demand, would result in both an increase in rate and number of workers in addition to increases efficiency. ||  || ||
 * 2 || John Doe

The wage paid in perfect competition was found when the supply and demand curves intercept. The wage paid in monopsony is found by first finding the point where Marginal Factor Cost curve and the Demand curve intercept. When this point is vertically extended to the Supply curve for the market you find the wage paid in monopsony. The monopsony wage paid is much lower than the perfect compaction wage paid as shown by the graph. The perfect competitive wage is much more efficient since it allows workers to get paid more. So when the minimum wage is at the intersection of the supply and demand curves, the firms are most efficient. ||  ||
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