Scenario 14.1
A worker in Firm A earns an income of $5,000 per month. He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-The profit-maximizing number of workers for a monopsony to employ is derived at the point where the marginal revenue product of labor is equal to the marginal factor cost of labor.

Question

Quizplus · Accepted Answer

This statement is true. Monopsony firms have the ability to influence wages in the labor market due to their market power. To maximize profits, a monopsony firm will employ workers until the marginal revenue product of labor (MRPL) is equal to the marginal factor cost of labor (MFC). This is the point where the additional revenue generated by hiring one more worker is equal to the additional cost of hiring that worker.

Scenario 14.1 A Worker in Firm a Earns an Income of $5,000