MicroeconomicECONOMICSOFTHEENVIRONMENT幻灯片.pptVIP

* * * * * * * * * * * * * * * * * * * * * * Notes and teaching tips: 15, 25, 31, 38, 42, and 43. To view a full-screen figure during a class, click the red “expand” button. To return to the previous slide, click the red “shrink” button. To advance to the next slide, click anywhere on the full screen figure. * * * * * * * * * * * * The hunter becomes the hunted. Point out that in the labor market the tables have been turned compared to the goods and services market. The household that is on the demand side of the markets for consumer of goods and services is now on the supply side of the market. Perfect competition and price taking. Just as the perfectly competitive firm in the market for a good or service is a price taker in that market, so the individual household in a perfectly competitive factor market is a price taker. Also, the firm that buys the services of the factor of production is a price taker in a perfectly competitive factor market. Even in the market for land, which is in perfectly inelastic supply, the individual landowner faces a perfectly elastic demand for his or her land. * * Because the monopsony controls the wage rate, the marginal cost of labor exceeds the wage rate. The marginal cost of labor curve MCL is upward sloping. The monopsony maximizes profit by hiring the quantity of labor at which MCL = VMP. Labor Markets The monopsony pays the lowest wage rate for which that quantity of labor will work. Compared to a competitive labor market, the monopsony employs fewer workers and pays a lower wage rate. Labor Markets A Union and a Monopsony Sometimes both the firm and the employees have market power when a monopsony encounters a labor union, a situation called a bilateral monopoly. Both the employer and the union must judge each others market power and come to an agreement on the wage rate paid and the number of workers employed. Depending on the relative costs that each party can inflict on the other, the outcome of this bargaining might