(Answered) Please give me the full answer and make sure your answer is correct Consider the labor market for…

Please give me the full answer and make sure your answer is correct Consider the labor market for halrstyllists In two small towns, each with only one hair salon, such that the owners of the salons have monopsony hiring power for hairstyllsts. The following graphs depict the labor supply, marginal expense of labor ( \( M E_{L} \) ), and labor demand in these markets.Complete the following table with the profit-maximizing quantity of labor each salon will hire, along with the wage it will pay for each hour of labor.In Town 1, the salon pays a wage that is _ \( r \) the marginal value product of the final unit of labor hired, whereas In Town 2, the wage is . the marginal value product of the final unit of labor hired.The outcome in Is farther from that of a competitive market, given that the supply of labor is elastic (at the market equillibrium) with respect to changes in the wage.
Answer
General rule for a monopsonist: choose employment where marginal expense of labor (ME_L) equals the value of the marginal product of labor (labor demand, MRP). The wage paid is the corresponding value on the labor supply curve at that employment level. Because the supply curve lies below ME_L for a monopsonist (except in the perfectly elastic case), the wage paid is typically less than the marginal value product at the chosen employment level.
Town
Profit-maximizing quantity of labor (Q*)
Wage paid (W*)
Relation of W* to marginal value product (MRP at Q*)
How far from competitive outcome
Town 1
Q1 = the quantity where ME_L intersects labor demand (MRP). (This is less than the competitive quantity.)
W1 = the wage given by the labor supply curve at Q1.
W1 < MRP at Q1 (wage is less than the marginal value product). Farther from the competitive outcome because the supply curve is relatively inelastic (so the monopsonist can reduce employment substantially below the competitive level and pay a much lower wage). Town 2 Q2 = the quantity where ME_L intersects labor demand (MRP). (This is higher than Q1 and closer to the competitive quantity.) W2 = the wage given by the labor supply curve at Q2. If the supply is highly elastic (near horizontal), W2 ≈ MRP at Q2; in other words, the wage is equal to (or much closer to) the marginal value product. Closer to the competitive outcome because the supply is elastic, so the monopsonist’s distortion is smaller and the wage and employment are nearer the competitive levels. Summary: For both towns the monopsonist hires where ME_L = MRP and then pays the wage given by the supply curve at that employment. In Town 1 the wage is less than the marginal value product and the outcome is farther from the competitive benchmark (supply is inelastic). In Town 2 the wage is much closer to (or equal to, if supply is perfectly elastic) the marginal value product and the outcome is closer to the competitive market.