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A-Level Economics · Monopsony labour market diagram question

Which point decides how many workers the monopsonist EMPLOYS?

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The answer

Point A. MRPL = MCL at point A: 4 workers. The firm hires up to the worker whose output value just covers what that hire costs at the margin. The monopsonist hires where the marginal revenue product of labour equals the MARGINAL cost of labour — point A, 4 workers. Employment first, wage second. Note it hires FEWER than the competitive 6 at F.

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This is one of 6 questions on the monopsony labour market diagram — every corner lettered, every wrong answer diagnosed.

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