In a monopsony labor market, if a firm experiences an increase in its marginal revenue product due to higher demand for its goods, what is the likely effect on wages and employment levels for workers?

In a monopsony labor market, there is only one major employer who has significant control over wages and employment. If this employer sees an increase in demand for its goods, it will likely experience a rise in its marginal revenue product, which means each worker it hires contributes more value to the company. To take advantage of this increased productivity, the firm may choose to hire more workers, which could lead to an increase in employment levels. However, since the firm is a monopsony, it might not raise wages as much as it could because it has the power to set lower wages. For example, if a factory that produces toys sees a surge in toy sales, it may hire more workers but might only raise wages slightly, keeping most of the increased profit for itself while still attracting enough workers to meet demand.