Final answer:
The equilibrium is found graphically where the demand (MRP) intersects with the marginal factor cost (MFC), and this level is projected onto the labor supply curve to find the corresponding wage.
Step-by-step explanation:
The question is concerned with the optimization of labor costs in a firm that faces a monopsony situation in the labor market, central to labor economics and microeconomics. The aim is to determine the Lm level of employment at which the firm can maximize profits, considering the provided labor supply function (ws = 25 + 5L), and the marginal factor cost (MFC = 25 + 10L).
A firm seeking to maximize profits in such a scenario will hire workers up to the point where the value of the marginal product (VMP or MRP) equals the marginal cost of labor (MCL). Graphically, one could identify the equilibrium wage (Wm) and employment level (Lm) by where the labor demand curve intersects with the marginal factor cost curve and then projecting it onto the labor supply curve.
Monopsonies, by being the sole demander of labor, must increase wages for all workers, not just the marginal ones, which results in a situation where the marginal cost of labor is higher than the wage rate from the supply curve. To visualize this concept, we can refer to Figure 14.8 and Figure 14.9 that are mentioned in the supporting information, understanding that the actual figures are not provided here. By drawing vertical lines from the determined Lm to the supply curve and reading off the corresponding wage, we find the wage level required to attract Lm workers.