FIGURE APX-2 MARGINAL FACTOR COST
This monopsonistic firm faces a positively sloped supply curve, SL. The firm could hire 14 workers for $10 an hour (point a), or it could increase wages to $11 an hour and hire 15 workers (point b). Since the supply curve is positively sloped, however, adding one more worker will cost the firm more than the cost of a new worker. To hire an added worker requires a higher wage, and all current employees also must be paid the higher wage. Therefore, the total wage bill rises by more than just the added wages of the last worker hired. The marginal factor cost curve reflects these rising costs.