Details

The labor supply curve in this model reflects in essence the average costs for a monopsonist, so total costs are . "Marginal costs," understood as the derivative of total costs of the monopsony, are . It is important that is growing, so that the marginal costs curve is above the labor supply curve (with difference ). This means that employing additional units of labor needs higher wages not only for that unit but for all units employed.

What is the analog of "marginal revenue"? In general terms, some revenue function is concave. So the marginal revenue product of labor is the function , which decreases with (by definition, ). In the Demonstration, we can consider . As a rule, monopsony market wages are lower than in the competitive market.

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Reference

[1] Wikipedia. "Monopsony." (Nov 13, 2015) en.wikipedia.org/wiki/Monopsony.