Monopsonist buyer

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1. [6 points total] Consider a market with a monopsonist buyer and a price-taking supply side. The marginal benefit curve is MB(Q) = 800-2Q and the marginal cost curve is MC(Q) = 4Q.

(a) [2 points] What is formula for the inverse-supply curve, p(Q)? What is the formula for the marginal outlay curve, MOL(Q)?

(b) [4 points] What quantity does the monopsonist buy? What price does it pay? Draw a graph and label the price, quantity, consumers’ surplus, producers’ surplus, and deadweight loss.

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