Consider the case of a monopsonist who is the only employer in an isolated town in West Virginia. There are 100 individuals who live in the town, and…

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 monopsonist’soutput 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.

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