The figure given below represents equilibrium in the labor market. Figure 14.5 In the figure,
VMP: Value of marginal product curve
MRP: Marginal revenue product curve
MFC: Marginal factor cost
S: Supply curve of labor
In Figure 14.5,the firm is:
A)a monopsonist in the labor market and a perfect competitor in the output market.
B)a monopsonist in the labor market and a monopolist in the output market.
C)a perfect competitor in all markets.
D)a perfect competitor in the labor market and a monopolist in the output market.
E)either a monopolist or a monopsonist,but not both.

Question

The figure given below represents equilibrium in the labor market. Figure 14.5  In the figure,
VMP: Value of marginal product curve
MRP: Marginal revenue product curve
MFC: Marginal factor cost
S: Supply curve of labor
In Figure 14.5,the firm is:
A)a monopsonist in the labor market and a perfect competitor in the output market. 
B)a monopsonist in the labor market and a monopolist in the output market. 
C)a perfect competitor in all markets. 
D)a perfect competitor in the labor market and a monopolist in the output market. 
E)either a monopolist or a monopsonist,but not both.

Quizplus · Accepted Answer

The figure shows a monopsonist in the labor market because the MFC curve is above the supply curve of labor, indicating that the firm has market power in hiring workers. Additionally, the firm is a monopolist in the output market because the MRP curve is the firm's demand curve for labor, which is downward sloping. Therefore, the firm has the ability to set a higher price for its output due to lack of competition.

The Figure Given Below Represents Equilibrium in the Labor Market