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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?

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Answer:

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

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.

                                         

                                       

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