Why MRC curve is above the labour supply curve facing the monopsonist? Why for a monopsonist MRC>W ?
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The MRC (Marginal Resource Cost) curve is above the labor supply curve facing a monopsonist because the monopsonist has the power to set the wage rate in the labor market. In a perfectly competitive labor market, the wage rate is determined by the intersection of the labor supply curve and the labor demand curve. However, in a monopsonistic market, there is only one buyer (the monopsonist) who can control the wage rate.
To understand why the MRC is above the labor supply curve, we need to break down the concept of marginal cost. The MRC represents the additional cost incurred by the monopsonist for hiring one more unit of labor, while the labor supply curve represents the willingness of workers to supply labor at different wage rates.
When the monopsonist wants to hire an additional worker, it needs to consider not only the wage it pays to that worker (W), but also the increase in the wage it needs to pay to all other workers (MRC). This is because when the monopsonist hires more workers, it has to offer a higher wage to attract those workers, which leads to an increase in the wage rate for all existing workers.
Therefore, the MRC curve is above the labor supply curve as it takes into account the increase in the wage rate for all workers, resulting in a higher cost for the monopsonist. This is represented by the inequality MRC > W, meaning that the MRC is greater than the wage rate.
In summary, the MRC curve is above the labor supply curve facing a monopsonist because the monopsonist has the power to set the wage rate, and when it hires an additional worker, it incurs additional costs not only in terms of the wage paid to that worker but also in terms of the increase in the wage paid to all existing workers.