Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

-(Exhibit: Monopoly and Monopsony) In Panel (b), if activity is carried on at the maximizing level specified by the marginal decision rule:

Question

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony
 
-(Exhibit: Monopoly and Monopsony) In Panel (b), if activity is carried on at the maximizing level specified by the marginal decision rule:

Quizplus · Accepted Answer

In Panel (b), the marginal factor cost (MFC) curve intersects with the supply curve of labor at a point where MFC is greater than the factor price. This indicates that the firm is a monopsonist, meaning it exerts market power in the labor market and can reduce the wage rate to hire more workers. At the profit-maximizing level of employment, MFC equals the marginal revenue product (MRP), not the factor price. Therefore, choice C is the correct answer.

Use the Following to Answer Question 63-70