# 4.4 — Factor Markets — Practice Problems

Carl’s Coal Mining operates in a remote area. Because of its location, it has monopsony power in the local labor market for miners. Its marginal revenue product of labor is $MRP_L = 400-5L$ where $$L$$ is the total number of miners. The labor supply curve of local miners is $w = 5L-50$ where $$w$$ is the wage (in \$1000’s per miner).

### a

Write a function for the marginal cost of labor.

### b

What quantity of workers will the mine hire, and what wage will it pay its workers?

### c

What would the quantity of workers be, and what would the wage be, if there was competition among other local mines for labor?

### d

Sketch a graph of this market, and be sure to label all of your findings (and show the Deadweight Loss) from Parts A-C.