The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6 In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
According to Figure 14.6, what is the wage paid by a monopsonist?

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor. Figure 14.6  In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
According to Figure 14.6, what is the wage paid by a monopsonist?

Quizplus · Accepted Answer

The wage paid by a monopsonist is lower than the wage paid in a competitive labor market, which would be at the intersection of the demand and supply curves. In this case, the monopsonist's MFC curve intersects with the supply curve at a wage of $12, which is lower than the competitive equilibrium wage. Therefore, the monopsonist would pay a wage of $12 to hire workers.

The Figure Given Below Represents Equilibrium in the Labor Market