Microeconomics,, 16th Canadian Edition

minimum wage equal to Show what happens
to wages and employment.
c. Now show the wage and employment outcome if there is
a monopsony buyer of labour services and no minimum
wage. Call this wage
d. Beginning with the monopsony outcome from part (c),
show what happens if the government imposes a
minimum wage above but lower than
e. Do minimum wages always reduce employment? Explain.
13. Consider a small, remote town with only one employer—a pulp
and paper mill. Suppose there are currently 600 workers, each of
whom is paid $5000 per month. In order to attract one additional
worker, the employer must increase all workers’ wage to $5100
per month. What is the marginal cost to the firm of hiring the
additional worker?
14. The table below shows how many workers are prepared to work
at various hourly wages in the forestry industry. It also shows the
workers’ marginal revenue product (MRP).

Number of

Workers

Wage

($)

Marginal Cost of Labour to

Monopsonist ($)

MRP

50 10

100 12 14

wmin>w∗.

wp.

wp w∗.