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A-Level Economics · Monopsony labour market diagram question

Which area is the WELFARE LOSS caused by the monopsonist's under-hiring?

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The diagram

The answer

The triangle A C F. Between 4 and 6 workers, MRPL sits above the supply curve: those jobs are worth doing and do not happen. Triangle ACF points at the competitive outcome F. For every worker between Qm = 4 and Qc = 6, what they would produce (MRPL) exceeds what it would take to hire them (ACL). Those matches are worth making and the monopsonist refuses to make them, so triangle ACF is surplus destroyed — pointing, as always, at the efficient outcome 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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