Use the following to answer question(s): Minimum Wage and Monopsony

-(Exhibit: Minimum Wage and Monopsony) With or without a minimum wage in its factor market, a profit-maximizing monopsony firm should always hire the quantity of a factor where:

Question

Use the following to answer question(s): Minimum Wage and Monopsony
 
-(Exhibit: Minimum Wage and Monopsony) With or without a minimum wage in its factor market, a profit-maximizing monopsony firm should always hire the quantity of a factor where:

Quizplus · Accepted Answer

A profit-maximizing monopsony firm should always hire the quantity of a factor where marginal factor cost (MFC) equals marginal revenue product (MRP). This is because MFC represents the additional cost of hiring one more unit of the factor, while MRP represents the additional revenue generated by hiring one more unit of the factor. Therefore, hiring up to the point where MFC = MRP will maximize the firm's profits. Option A is incorrect because a minimum wage would impose a wage rate higher than the market equilibrium wage rate, so it would not be the point of minimum wage rate. Option B is incorrect because marginal factor cost is not equal to the wage rate in a monopsony market. Option D is incorrect because not all of the options state the same rule.

Use the Following to Answer Question(s): Minimum Wage and Monopsony