For a monopsonist that faces an upward- sloping labour supply curve, the marginal cost of labour curve will be above the supply curve because

Question

Quizplus · Accepted Answer

In a monopsony where the labour supply curve is upward-sloping, the monopsonist must increase wages to attract more workers. However, this increased wage must also be paid to all the workers already employed (as they will demand higher wages in response to the increased opportunity cost of their time), leading to a higher marginal cost of labour (the cost of employing an additional worker) than the supply curve (which reflects the cost of employing one more worker without affecting the wages of existing workers). Therefore, choice C is the correct answer.

For a Monopsonist That Faces an Upward- Sloping Labour Supply