If a firm is a monopsonist in the hiring of both labor and capital, it will obtain the profit-maximizing quantities of labor and capital when
A)$\mathrm{MRP} _{L} / P_{L}=\mathrm{MRP} C / P C=1$
B)$\mathrm{MRP}_{L} / \mathrm{MRC} L=\mathrm{MRP}_{C} / \mathrm{MRC} _{C}=1 .$
C) the MRP of labor equals the MRP of capital.
D) the MRC of labor equals the MRC of capital.

Question

Quizplus · Accepted Answer

When a firm is a monopsonist in the hiring of both labor and capital, it will obtain the profit-maximizing quantities of labor and capital where the ratio of marginal revenue product to price is equal for both inputs. So, the condition for profit maximization is: 
$\mathrm{MRP}_{L} / \mathrm{MRC} L=\mathrm{MRP}_{C} / \mathrm{MRC} _{C}=1 .$ Option B represents this condition. Therefore, the answer is B.

If a Firm Is a Monopsonist in the Hiring of Both