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Monopsony and Competition - he has control over the labor...

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Monopsony and Competition: A producer has monopsony power only in the labor market. In the product market he faces competition with other firms. In Figure 55 we notice such a situation. In a competitive commodity market the demand curve of the producer is at once both the Marginal Revenue Product and the Average Revenue Product (MRP = ARP) curve. Because of uniform product price both values are identical. In the labor market, however,
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Unformatted text preview: he has control over the labor supply. Therefore the supply curve slopes upwards. The value of Marginal Wage (MW) differs from Average Wage (AW) . Both the MW and AW curves slope upward but MW is above AW. The firm is in equilibrium at point e with MRP = MW. In equilibrium position, N number of workers are employed and the price of the product is P. Exploitation = Total Revenue - Total wage cost = OPeN - OWLN = WPeL...
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