1. Answer the following questions based on the adjoining graph (graph 1):
A. Why is the supply curve (or W(L) curve) upward-sloping?
B. Why does the marginal cost of labor (MCL) curve lie above the supply curve?
C. What is the equilibrium amount of labor (in this example)?
D. What is the equilibrium wage rate (in this example)?
E. On the graph, mark the ‘monopsony outcome’?
2. Why is there a difference in the supply curve facing an individual firm when we move from analyzing a competitive labor market to analyzing a monopsony labor market?
1. Graph Question (graph 1):
A. When a minimum wage is imposed on the monopsony labor market, what happens to the MCL curve?
B. When a minimum wage is imposed on the monopsony labor market, what happens to the MRPL curve?
C. Explain how does the equilibrium conditions (equilibrium wage and equilibrium employment) change when a minimum wage is imposed?
D. For what range (of wage rate) will the imposition of a minimum wage lead to an increase in employment?
E. For what range (of wage rate) will the imposition of a minimum wage lead to a decrease in employment?