Data in the Following Table Refer to the Purchase of a Resource

question 73

Essay

Data in the following table refer to the purchase of a resource by a pure monopsonist. Let the resource be labor time L, measured in hundreds of hours per day.
Units of Labor Marginal Average Marginal Revenue
Input Expenditure Expenditure Product
L ME AE MRP
1 10 10 16
2 12 11 15
3 14 12 14
4 16 13 13
5 18 14 12
6 20 15 11
7 22 16 10
8 24 17 9
a. Determine the profit maximizing purchase rate of labor for the monopsonist.
b. If this market were not monopsonistic but competitive, what would be the purchase rate of labor time?
c. Determine the equilibrium wage rate in both the monopsonistic and competitive markets.

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Definitions:

Tukey's

A statistical method, commonly Tukey's range test or Tukey's Honest Significant Difference (HSD) test, used to find means that are significantly different from each other.

LSD

Lysergic acid diethylamide, a potent psychoactive drug, or in a statistical context, it might refer to the Least Significant Difference test for comparing means.

Randomized Block Design

A statistical experimental design that aims to reduce confounding variables by grouping similar experimental units into blocks before randomly assigning treatments within each block.

Sum of Squares for Blocks

Sum of Squares for Blocks is a measure used in analysis of variance (ANOVA) to assess the variance within groups or blocks of a factor in an experimental design.