Consider a town with a monopsonist who is the only employer. There are 100 people living...

 

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Consider a town with a monopsonist who is the only employer. There are 100 people living in the town, and each person's utility function is u(c, l) = 0.25ln(l) +0.75ln(c) Price is normalized to 1, and each individual has non-labor income of 20, and total time endowment of 20. Price of monopsonist's good is 10. The monopsonist only uses labor in production, so their production technology is: f(k, l) = 1 (a) Find wage, labor demanded, and output of the monopsonist. (b) Now, the local government imposes a minimum wage of $5. What is the demand for labor now? (c) What happens if minimum wage is $15? Consider a town with a monopsonist who is the only employer. There are 100 people living in the town, and each person's utility function is u(c, l) = 0.25ln(l) +0.75ln(c) Price is normalized to 1, and each individual has non-labor income of 20, and total time endowment of 20. Price of monopsonist's good is 10. The monopsonist only uses labor in production, so their production technology is: f(k, l) = 1 (a) Find wage, labor demanded, and output of the monopsonist. (b) Now, the local government imposes a minimum wage of $5. What is the demand for labor now? (c) What happens if minimum wage is $15?

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a To find the compensation work requested and result of the monopsonist we want to expand the monops... View the full answer