In a monopsony labour market with minimum wage legislation, a firm's MFC is:
A)identical to the supply of labour at all wages.
B)horizontal while the wage is greater than the supply of labour.
C)steeper than the supply of labour at all wages.
D)flatter than the supply of labour at all wages.

Question

Quizplus · Accepted Answer

In a monopsony labour market with minimum wage legislation, a firm's MFC is horizontal while the wage is greater than the supply of labour. This is because the firm has some bargaining power over the workers and can hire them at a wage lower than the marginal cost of labour. However, when the wage equals or falls below the supply of labour, the firm must pay the market wage, and the MFC becomes identical to the supply of labour.

In a Monopsony Labour Market with Minimum Wage Legislation, a Firm's