4. If a monopsonist employer can perfectly wage-discriminate in hiring its workforce there is no dead- weight loss associated with the monopsony. (a) Explain the above statement. (b) Why is wage discrimination generally illegal even though it improves our usual measure of wel- fare W (the sum of worker surplus and buyer or employer surplus) in the factor market? (c) If all employers in an economy were effectively monopsonists who could engage in perfect wage discrimination, what would the resulting allocation of society's output look like intuitively?
4. If a monopsonist employer can perfectly wage-discriminate in hiring its workforce there is no dead- weight loss associated with the monopsony. (a) Explain the above statement. (b) Why is wage discrimination generally illegal even though it improves our usual measure of wel- fare W (the sum of worker surplus and buyer or employer surplus) in the factor market? (c) If all employers in an economy were effectively monopsonists who could engage in perfect wage discrimination, what would the resulting allocation of society's output look like intuitively?
Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.5P
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