FIGURE 14.9 Labor Market Outcomes Under Monopsony A monopsony will hire workers up to the point Lm where

its demand for labor equals the marginal cost of additional labor, paying the wage Wm given by the supply curve of

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14.3 • Market Power on the Supply Side of Labor Markets: Unions 335

labor necessary to obtain Lm workers.

If the firm wants to maximize profits, it will hire labor up to the point Lm where DL = VMP (or MRP) = MCL, as
Figure 14.9 shows. Then, the supply curve for labor shows the wage the firm will have to pay to attract Lm

workers. Graphically, we can draw a vertical line up from Lm to the Supply Curve for the label and then read

the wage Wm off the vertical axis to the left.
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