Question: Eureka, Nevada, is a small town with only one restaurant, Dj’s Diner. For the purposes of this exercise, you may consider D] to be a geographical monopsonist. Assume further that D] sells only one type of product (burgers) at $2 each. His production function is given by the data on labor input and output in the following table. The labor supply curve is given by the data on labor input and the hourly wage.

Use the information in the table to calculate the following at each level of output

1. Marginal product
2. Marginal revenue product
3. Total labor cost
4. Marginal labor cost.

Use your calculations to determine the level of employment at Dj’s Diner. How would your answer change if this restaurant operated in a competitive labor market?

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Solution: The downloadable solution consists of 2 pages
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