Monopsony and Minimum Wage

Heya can you draw me the diagram for the nmw and monospony power. Im conufsed with Nmw is below the compeititvelevel but above monospony where how do i find the quanitiy demanded is it when D=AC or when the wae rate and demand curve meet?

Unfortunately I don't have time to draw a new diagram, but lets have a look at this monopsony diagram

Diagram of monopsony

The competitive wage is at W1,

The monopsony maximises profits where MR = MC. therefore can pay a wage of W2.

If there is a minimum wage between W1 and W2. The quantity employed will be where the NMW line meets the Supply curve. Basically, in this case a wage above W1, but below W2, should in theory increase the quantity of workers.

Labour Market Imperfections


Perma Link | By: T Pettinger | Tuesday, June 12, 2007
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Blogger EdDY said...

Thank you so much for your free materials !! They help a lot ! It's very nice of you !!

June 2, 2008 9:08 PM  

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