A small town has only one major employer, a factory that hires all the available workers in the area. Recently, the factory announced a decrease in wages due to increased production costs. What is the most likely consequence of this wage decrease in the context of the factor market?

When a factory is the only major employer in a small town, it has a special kind of market power known as a monopsony. If the factory decreases wages, many workers may feel discouraged and might not want to work there anymore, leading to a decrease in the supply of labor. This means that the factory may struggle to find enough workers to meet its production needs. For example, if a factory pays $15 an hour but cuts wages to $12, some workers might look for jobs elsewhere or might decide not to work at all, causing labor shortages. In the long run, this could hurt the factory's productivity and the overall economy of the town.