5.4

Monopsony

AP Microeconomics

What Is a Monopsony?

Why MFC > W for a Monopsonist

Numerical Example

Monopsony Graph

12345678123456789101112131415161718192021222324252627282930313233343536373839404142434445Workers$/workerMFC=MRP → hire 3.5Wage = $15 (from S)MFCS (labor supply = wage)MRP = D(labor)

Monopsony: hire where MRP = MFC, but pay wage from the supply curve (below)

How the Monopsonist Decides

Monopsony vs. Competitive Labor Market

Monopsony Deadweight Loss

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Common Mistakes