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Labor Monopoly and Monopsony

Labor Monopoly and Monopsony. The Monopoly. Suppose we have a a monopoly industry. The Monopoly. Suppose we have a a monopoly industry. The firm still has a MPP curve. The Monopoly. Suppose we have a a monopoly industry. The firm still has a MPP curve However we are not interested in

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Labor Monopoly and Monopsony

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  1. Labor Monopoly and Monopsony Lectures in Microeconomics-Charles W. Upton

  2. The Monopoly • Suppose we have a a monopoly industry. Labor Monopoly and Monopsony

  3. The Monopoly • Suppose we have a a monopoly industry. • The firm still has a MPP curve Labor Monopoly and Monopsony

  4. The Monopoly • Suppose we have a a monopoly industry. • The firm still has a MPP curve • However we are not interested in VMP = MPP * P • But MRP = MPP *MR Labor Monopoly and Monopsony

  5. The Monopoly • The monopolist’s demand function is determined by MRP, not VMP. wo MRP= MPP x MR Lo Labor Monopoly and Monopsony

  6. The Monopoly • The monopolist’s demand function is determined by MRP, not VMP. • Since MR < P, MRP < VMP. wo MRP= MPP x MR Lo Labor Monopoly and Monopsony

  7. The Monopsonist • A monopoly is a sole seller; a monopsonist is a sole buyer. Labor Monopoly and Monopsony

  8. The Monopsonist • A monopoly is a sole seller; a monopsonist is a sole buyer. • As a monopolist worries about MR, a monopsonist worries about MCF Labor Monopoly and Monopsony

  9. The Monopsonist w S wo N No Labor Monopoly and Monopsony

  10. The Monopsonist w S w* wo N No N* Labor Monopoly and Monopsony

  11. The Monopsonist S w* wo Labor Monopoly and Monopsony No N*

  12. The Monopsonist MCF S VMP w VMP Labor Monopoly and Monopsony N

  13. The Monopsonist/Monopolist MCF S VMP MRP w VMP MRP N* N Labor Monopoly and Monopsony

  14. The Monopsonist/Monopolist MCF Equilibrium if both markets are competitive S VMP MRP w VMP MRP N* N Labor Monopoly and Monopsony

  15. The Monopsonist/Monopolist MCF Equilibrium if both markets are competitive S VMP MRP Monopolist with competitive labor market w VMP MRP N* N Labor Monopoly and Monopsony

  16. The Monopsonist/Monopolist MCF Equilibrium if both markets are competitive S VMP Competitive market with monopsony labor market MRP Monopolist with competitive labor market w VMP MRP N* N Labor Monopoly and Monopsony

  17. The Monopsonist/Monopolist MCF Equilibrium if both markets are competitive S VMP Competitive market with monopsony labor market MRP Monopolist with competitive labor market w Monopoly market with monopsony labor market VMP MRP N* N Labor Monopoly and Monopsony

  18. The Monopsonist/Monopolist MCF S VMP MRP w VMP MRP N* N Labor Monopoly and Monopsony

  19. Two Issues • Is this exploitation? Labor Monopoly and Monopsony

  20. Two Issues • Is this exploitation? • In the sense that the workers are not being paid the VMP, it is. Labor Monopoly and Monopsony

  21. Two Issues • Is this exploitation? • Price Discrimination Labor Monopoly and Monopsony

  22. Two Issues • Is this exploitation? • In the sense that the workers are not being paid the VMP, it is. • Price Discrimination • Confidential salaries • Moving expenses and hiring bonuses Labor Monopoly and Monopsony

  23. End ©2006 Charles W. Upton Labor Monopoly and Monopsony

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