Under monopsony, the marginal factor cost of a worker is equal to

Question

Quizplus · Accepted Answer

In a monopsony, where there is only one buyer (employer) in the labor market, the marginal factor cost of hiring an additional worker includes not only the wage rate that the new worker receives but also the increase in wages that the employer must pay to all the existing workers as a result of hiring the additional worker. This is because, in a monopsony, to attract one more worker, the firm often has to raise the wage rate, which applies to all workers, not just the new one.

Under Monopsony, the Marginal Factor Cost of a Worker Is