Question

Oswald Publishing is a monopsonist that just increased its workforce from 100 to 101 employees. It is paying the new employee $17 per hour. All of the other employees were earning $16 per hour, but they were all given raises to $17 to maintain fairness. What is the marginal factor cost?

Answer 1

The answer is: Marginal factor cost of labor per hour is $117 for one new worker.

Step-by-step explanation:

The marginal factor cost of labor per hour can be calculated using the following formula:

change in total factor cost

marginal factor cost = ____________________

change in factor quantity

($17 x 101 workers) - ($16 x 100 workers)

marginal factor cost = _______________________________

101 workers - 100 workers

marginal factor cost = ($1,717 - $1,600) / 1 = $117

Marginal factor cost of labor per hour is $117 for one new worker.