A monopsonist faces an upsloping supply curve of labor, but it could face a horizontal demand curve for its product in the output market.

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A monopsonist, by definition, is the sole buyer in a market, typically for labor, and thus faces an upsloping supply curve of labor due to increasing marginal costs of hiring additional workers. However, the demand curve for its product in the output market can be horizontal if the product is sold in a perfectly competitive market, indicating that the firm is a price taker for its output and can sell any quantity of its product at the prevailing market price.

A Monopsonist Faces an Upsloping Supply Curve of Labor, but It