MONOPSONY AND EFFICIENCY: A monopsony firm generally produces less output and pays a lower price than would be the case for a perfectly competitive industry. In particular, the price charged by a monopsony is not equal to (in fact, lower than) the marginal revenue product. The equality between factor price and marginal revenue product is THE key indication that resources are allocated efficiently and that society's resources are being used to generate the highest possible level of satisfaction. See also | monopsony | efficiency | perfect competition | factor markets | monopoly | bilateral monopoly | price maker | efficiency | allocation | monopsony and efficiency | perfect competition |
