FIGURE APX-4 MONOPOLIST FIRM IN THE PRODUCT MARKET THAT IS A MONOPSONIST IN THE INPUT MARKET
This firm has both monopoly and monopsony power. The firm’s equilibrium hiring will be at the point at which MFC = MRPL (point a), and thus the firm will hire L0 workers, although at wage W0. Note that this is the lowest wage and employment level shown in the graph. If the firm only had monopsony power, it would hire L1 workers (point b) at a wage of W1. If the firm only had monopoly power, it would also hire L1 workers for wage W1 (point c). Both of these employment levels and wage rates are less than the competitive outcome of LC and WC (point d).