Monopsonistic Exploitation: Understanding the Concept and Calculation

What is monopsonistic exploitation and how is it calculated?

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...

Monopsonistic exploitation calculation:

Monopsonistic exploitation is the difference between the marginal revenue product and the wage. In the case of Mr. Johnson, his monopsonistic exploitation is $400.

Monopsonistic exploitation is a concept in economics that refers to the difference between the revenue generated from the last unit of input (marginal revenue product) and the wage paid to the input supplier. In the case of Mr. Johnson, who has a marginal product of 2 and earns $300 in marginal revenue from an additional unit of that product, his wage is $200.

Therefore, the calculation of Mr. Johnson's monopsonistic exploitation is as follows:

Monopsonistic Exploitation = Marginal Revenue Product - Wage

Monopsonistic Exploitation = $600 (2 * $300) - $200 (wage)

Monopsonistic Exploitation = $400

This means that Mr. Johnson's monopsonistic exploitation is $400. This calculation helps us understand the economic concept of monopsonistic exploitation and its impact on input suppliers in a market where there is a single buyer.