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Chapter 14: Problem 7

The only legal employer of military soldiers in the United States is the federal government. If the government uses its knowledge of its monopsonistic position, what criteria will it employ when determining how many soldiers to recruit? What happens if a mandatory draft is implemented?

Short Answer

Expert verified
The federal government, in its monopsonistic position, determines recruitment by analysing the marginal cost and benefit of hiring additional soldiers. The goal is to optimise the recruitment level that achieves maximum utility at minimum costs. If a mandatory draft is imposed, the supply of soldiers dramatically increases, allowing for more flexibility in deployment and strategy without additional financial burdens.

Step by step solution

01

Understand Monopsony

A monopsony, by definition, is a market situation where there is only one buyer (in this case, the federal government), with many sellers (potential soldiers). The buyer holds significant control over the wage rate because the seller has few or no alternatives.
02

Recruitment Decisions

The government, as a monopsonist, will determine the number of soldiers to recruit based on its needs, budget, and strategic goals. More specifically, it will consider the marginal cost and benefit of hiring additional soldiers and decide upon an optimal amount of recruitment that minimises cost and maximises utility.
03

Mandatory Draft Effects

If a mandatory draft is implemented, the supply of soldiers would increase significantly. This implies that the government can recruit more soldiers without increasing wage rates. Since the supply is higher, the government also has more options and greater flexibility in terms of deployment and strategic planning without worrying about cost overburden.

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