What effect does a binding minimum wage have on a monopsony labor market?

 Question: What effect does a binding minimum wage have on a monopsony labor market?

Solution: A monopsony labor market is a type of market structure where there is one employer and many laborers looking for work with that employer.

Minimum wage rate in a monopsony labor market will cause firms to still operate at the point marginal factor cost curve equals marginal revenue product curve.

When firms are forced to pay a set minimum wage, MRP increases because of increased output along with increase in costs. This will result in increased employment.

Unlike competitive firms, where employment falls due to minimum wage, in case of monopsony, it increases.