Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 36

Is there a deadweight loss from the monopsony pictured in Figure? How would this loss be shown graphically? Who would suffer this loss?
Figure Pricing in a Monopsonistic Labor Market
If a firm faces a positively sloped supply curve for labor (S), it will base its decisions on the marginal expense of labor curve (MEL ). Because S is positively sloped, MEL lies above S. The curve S can be thought of as an average cost of labor curve, and the MEL curve is marginal to S. At L1 the equilibrium condition MEL = MVPL holds, and this quantity will be hired at a market wage rate w1.