In a labor market where a monopsony exists, how does the firm's marginal revenue product of labor relate to its ability to maximize profits, and what implications does this have for income distribution among workers?

In a monopsony, there is only one employer in the labor market, giving that firm significant power over wages and employment. The firm's marginal revenue product of labor, which is the additional revenue generated from hiring one more worker, is crucial for maximizing profits. To maximize profits, the monopsonist will hire workers until the cost of hiring an additional worker equals the additional revenue that worker produces. However, because the monopsonist can set wages lower than in a competitive market, this often results in lower income for workers compared to what they would earn elsewhere. For example, if a monopsonist pays workers $15 per hour while their marginal revenue product is $20, the firm benefits from the $5 difference, but workers miss out on higher wages they could earn in a more competitive market.