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December 22, 2014

Homework Help: economics - monopoly/monopsony

Posted by kevin on Sunday, October 1, 2006 at 11:26pm.

just a quick qusetion....if a firm is both a monopoly and a monopsony. How would the profit maximizing wage and lvl of labour in the short run be determined for this firm


Use the profit maximizing principals. Regardless of the existing market, a firm will hire until the value of the marginal product (VMP) equals the marginal factor cost (MFC). The MFC, the marginal cost for producing 1 more unit of output, for a monopsony is some increasing function of the number of workers already hired. This can be converted into an increasing funciton of the amount of output produced. The VMP is the price a which 1 more unit of output can be sold, and is a decreasing function of output sold.


features of monopoly

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