Question

A monopsonist labor market has the following output and total factor cost of labor data (total factor cost= TFC).

	MONOPSONIST
Workers (n)	1	2	3	4	5	6	7	8
Total Physical Product (TPP)	0	19	27	34	40	45	49	52
Total Factor Cost (TFC)	12	26	42	60	80	102	126	152

A. Number hired = 7; wage = $24

B. Number hired = 5; Wage = $12

C. none of the above

D. Number hired = 7; wage = $18

E. Number hired = 5; wage = $22

F. Number hired = 5; wage = $6

Answer 1

Answer: Number hired = 7; wage = $18

Workers (n)	1	2	3	4	5	6	7	8
Total Physical Product (TPP)	0	19	27	34	40	45	49	52
Total Factor Cost (TFC)	12	26	42	60	80	102	126	152
Wage per worker	12	=C3/C1	=D3/D1	=E3/E1	=F3/F1	=G3/G1	=H3/H1	=I3/I1

Workers (n)	1	2	3	4	5	6	7	8
Total Physical Product (TPP)	0	19	27	34	40	45	49	52
Total Factor Cost (TFC)	12	26	42	60	80	102	126	152
Wage per worker	12	13	14	15	16	17	18	19

Considering the wages per worker, Total factor cost is considered as the total wages paid to the employee. So, the wage per worker should be calculated as wage per worker = Total factor cost (TPC)/ workers(n)