If the marginal cost of labor curve lies above the labor supply curve, the firm is likely a(n):
A) monopsony.
B) bilateral monopoly.
C) oligopoly.
D) monopoly.

Question

Quizplus · Accepted Answer

A monopsony exists when there is only one buyer in the market, in this case, the firm being the sole buyer of labor. When the marginal cost of labor curve lies above the labor supply curve, it indicates that the firm faces an upward-sloping supply curve for labor, which is characteristic of a monopsony. This is because the firm must increase wages to attract additional workers, raising the marginal cost of hiring an additional worker above the wage rate that the last worker is willing to accept.

If the Marginal Cost of Labor Curve Lies Above the Labor