Consider a monopsonistic labour market.Ten units of labour will be supplied if the wage rate is $12,and 11 units of labour will be supplied if the wage rate is $14.The marginal cost of the eleventh worker is

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In a monopsonistic labor market, the firm is the sole buyer of labor and must increase wages to attract additional workers. The marginal cost of hiring an additional worker is not just the wage of that worker but also the increased wages for all previous workers. Here, hiring the 11th worker requires raising the wage from $12 to $14 for all 11 workers, so the marginal cost is more than $14.

Consider a Monopsonistic Labour Market