If a monopsonist hires labor, it
will choose to hire that quantity at which Marginal Revenue Product = Marginal Factor
Cost (MRP = MFC) and pay a wage rate that is less than Marginal Revenue Product
(MRP). Marginal Factor Cost (MFC) is the increment to total costs paid
for a factor of production resulting from a one-unit increase in the amount of
the factor employed while Marginal Revenue Product (MRP) is the market value of
one additional unit of output.
