As a result, the monopsony is able to set their own wages and quantity of labor that they want to employ. In order for a monopsony to maximize cost efficiency, the monopsony will, instead of taking the point where Supply intersects Marginal Revenue Product(MRP), find where their Marginal Resource Cost of labor(MRC) and use that as their quantity of workers employed(Qm). Using that quantity, the monopsony will then want to set their wages(Wm) to the minimum amount where they will attract Qm number of employees. This point ends up being where Qm intersects the Supply line.
What exactly does this all mean? When the monopsony sets their quantity where MRC intersects MRP, that quantity of labor will always be at a lower quantity than where the Supply intersects MRP due to MRC always having a larger slope. This means that the quantity of labor employed will be lower than the market supply, leaving less people with jobs with jobs than in a competitive labor market. On top of that, their wages become lower than they would be if they were working in a competitive market. In the end, the workers of a monopsonist end up being paid less, and others will lose out on a job that they could have had if the labor market had been competitive.
The concept of a monopsony is really interesting. I also really enjoyed the graph you included to help visualize how a monopsony influences the market. Are monopsonys very common in our economy? What kinds of organizations hold monopsonys? I feel like a lot of the agriculture industry would be considered a monopsony. Farmers are often controlled by the industry to produce more, often times sacrificing conditions for animals for productivity. In that regard, monopsonys are probably similar in monopolies in how they are harmful to the producers and those actually working.
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