Question

Mr. Johnson's marginal product is 2, the marginal revenue from selling an additional unit of that product is $300, and his wage is $200. The amount of his monopsonistic exploitation is...

a) $100
b) $200
c) $300
d) $400

Answer 1

Mr. Johnson is experiencing monopsonistic exploitation in the amount of $400, calculated by subtracting his wage from the total marginal revenue product of his labor.

Step-by-step explanation:

The question involves calculating the amount of monopsonistic exploitation that Mr. Johnson is experiencing. To do this, we must consider Mr. Johnson's marginal product, marginal revenue, and his wage. Mr. Johnson's marginal product is 2, meaning that for each unit of his labor, he produces two units of the product. The marginal revenue from selling an additional unit of that product is $300. Hence, the total marginal revenue product (MRP) for his marginal product of 2 units is 2 x $300 = $600. If Mr. Johnson's wage is $200 and we compare this with the marginal revenue product, we find that the amount of monopsonistic exploitation is the difference between the MRP and his wage, which is $600 - $200 = $400.