When contemplating the purchase of a resource, the pure monopsonist should do which of the following to maximize profit?
A) Purchase enough to make the marginal expenditure equal to the marginal revenue product.
B) Purchase enough to make the average expenditure equal to the marginal revenue product.
C) Pay a wage equal to the value of MRP at the intersection of MRP and ME curves.
D) Pay a wage equal to the value of MRP at the intersection of AE and MRP curves.

Question

Quizplus · Accepted Answer

A pure monopsonist maximizes profit by equating marginal expenditure (ME) with marginal revenue product (MRP), ensuring that the additional cost of acquiring an extra unit of the resource is exactly balanced by the additional revenue generated from its use.

When Contemplating the Purchase of a Resource, the Pure Monopsonist