Compared to a perfectly competitive labour market, a firm with monopsony power will typically pay a lower wage and employ fewer workers. This occurs because a profit-maximising monopsonist
hires workers up to the point where the marginal revenue product of labour is equal to the wage rate (average cost of labour).
acts as a monopoly supplier of labour to the wider economy.
equates the marginal revenue product of labour with the marginal cost of labour, which exceeds the wage rate.
restricts output in the product market to drive up the market price of its goods.
