FIGURE APX-3 COMPETITIVE FIRM IN THE PRODUCT MARKET THAT IS A MONOPSONIST IN THE INPUT MARKET
The monopsonist in this figure is a competitor in the product market and has a demand for labor equal to its VMPL, while facing supply of labor, SL. The firm will hire at the level where MFC = VMPL (point a), hiring L0 workers at wage W0 (point b). Note that these L0 workers, although paid W0, are worth W1. This is called the monopsonistic exploitation of labor. Note also that the wages paid in this monopsony situation (W0) are less than those paid under competitive conditions (WC), and that monopsony employment (L0) is lower than competitive employment (LC).