Question

12. Suppose that a new ultimate frisbee league is monopsonistic and the supply of labor curve can be described as Ls = − 700 + 100w. (where w is in thousands per season). Suppose also that the players’ marginal revenue product is MRPL = 19 − .02L. How will deadweight loss change in this market if the player’s union negotiates for a minimum wage of $11,000?

Answer 1

Thus with Minimum wage = 11,000

Entire Deadweight loss is eliminated

So DWL in Monopsony = .5*(400-300)*(13-10)

= .5*100*3

= 150 thousands

Thus due to Min wage, DWL falls from 150,000 to 0