Monopsony Versus Perfectly Competitive Firm
Both types of firms use the marginal principle to determine how many workers to hire.
Since the marginal labor cost exceeds the wage for the monopsonist, but not for the competitive firms, the monopsonist hires fewer workers at a lower wage.
- The competitive firms hire 52 workers at $13 an hour.
- The monopsonist hires 36 workers at $10 an hour.