1. Solve for the monopsonist’s demand for labor. At this demand level, what is the wage paid?2. The government imposes a minimum wage of 5. What is the demand for labor at this wage?Consider the case of a monopsonist who is the only employer in an isolated townin West Virginia. There are 100 individuals who live in the town, and each has a utility function given byu(l, c) = 0.25 lnl + 0.75 In c, where l is their leisure and c is their consumption level. The price of consumption,PC, is equal to 1, and each individual in the town has nonlabor income of Y = 10.Each person has a time endowment of T = 16. The price of the monopsonistsoutput is p = 20. The monopsonist only uses labor in production, and has the production technologyq = H: where H is the total number of labor hours utilized.
Monopsonist’s demand for labor
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