A monopsony will:

Question

A monopsony will:

Quizplus · Accepted Answer

A monopsony is a situation where there is only one buyer or employer in the market. In this case, the monopsonist has market power and can dictate the wages and the quantity of labor to employ. However, if a monopsonist wants to maximize profits, it must balance the benefits of hiring an additional worker (the marginal revenue product) with the costs of doing so (the marginal factor cost). Thus, a monopsony will employ a quantity of labor where the marginal revenue product equals the marginal factor cost, which is less than what a competitive employer would hire. Therefore, choice C is the correct answer. A and B are incorrect because a monopsony does not necessarily hire more workers or pay a higher wage than a competitive employer.

A Monopsony Will