PRD-4.D—a. Define (using graphs as appropriate) the characteristics of monopsonistic markets. b. Explain (using graphs where appropriate)…

a. Define (using graphs as appropriate) the characteristics of monopsonistic markets. b. Explain (using graphs where appropriate) the profit-maximizing behavior of firms buying labor (with other inputs fixed) in monopsonistic markets. c. Calculate (using data from a graph or table where appropriate) measures representing the profit-maximizing behavior of firms buying labor (with other inputs fixed) in monopsonistic markets.

• In a monopsonistic labor market, a typical firm hires additional labor as long as the marginal revenue product is greater than the marginal factor (resource) cost (the wage of a new unit of labor plus the wage increase given to all existing labor).
• When a typical firm hires additional workers in a monopsonistic labor market, the marginal factor (resource) cost is greater than the supply price of labor.
• Enduring understanding PRD-4: Factor prices provide incentives and convey information to firms and factors of production.