Woodland is a small town in which everyone works for TreeMart, the local lumber company. TreeMart is a monopsonist in the labor market and a perfect competitor in the lumber market. In the short run, labor is the only variable input. The labor market for TreeMart is given in the attached Graph 1. Answer questions 1 to 1 based on the attached graph.
1. What wage rate should TreeMart set if it wants to maximize profits?
2.What quantity of workers should the lumber company hire?
3. If TreeMart should become a perfectly competitive firm, what two likely outcomes would occur in the labor market?