The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia,with only one employer,a logging company.
FIGURE 14- 4
-A profit- maximizing monopsonist in a labour market will continue to hire labour until the

Question

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia,with only one employer,a logging company.
  FIGURE 14- 4
-A profit- maximizing monopsonist in a labour market will continue to hire labour until the

Quizplus · Accepted Answer

A profit-maximizing monopsonist in a labour market will hire labour up to the point where the marginal revenue product (MRP) of labour equals its marginal cost (MC). In this case, the MRP curve is downward sloping and intersects with the MC curve at point E. Therefore, the monopsonist will hire 80 workers and pay them a wage rate of $20 per hour. This is the point where the marginal cost of hiring an additional worker is equal to the revenue that worker generates for the firm (i.e. the MRP). Any additional workers beyond this point would cost more than the revenue they generate, so the firm will not hire them.

The Diagram Below Shows the Supply and Demand for Labour