To maximize its profits,a monopsonist will hire labor the quantity of labor at which marginal revenue product of labor

Question

Quizplus · Accepted Answer

A monopsonist maximizes profits by hiring labor up to the point where the marginal revenue product of labor (MRPL) is equal to its marginal labor cost (MLC), not the market wage rate. This is because a monopsonist, as the sole buyer of labor in the market, faces an upward-sloping labor supply curve, meaning that to attract additional workers, it must pay a higher wage, which increases the marginal cost of labor.

To Maximize Its Profits,a Monopsonist Will Hire Labor the Quantity