Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased demand for the final product leading to higher labor needs
B
A government mandate requiring higher minimum wages
C
A sudden increase in the number of workers available in the market
D
The monopsony realizing that paying higher wages will reduce turnover and training costs
Understanding the Answer
Let's break down why this is correct
Answer
A monopsony is a market situation where there is only one buyer for a particular type of labor. When a monopsony increases wages for its workers, it usually does so to attract more employees or to reduce turnover, which can be costly. For example, if a big company is the only employer in a small town and struggles to find enough workers, it may raise wages to encourage more people to apply for jobs. This increase in wages can help the company secure the labor it needs while also improving the workers' living standards. Overall, the change in wages reflects the company's need to compete for labor in a tight job market.
Detailed Explanation
The monopsony understands that paying higher wages can keep workers longer. Other options are incorrect because Some might think that higher demand for products means more workers are needed; It's easy to think that laws force companies to raise wages.
Key Concepts
Monopsonies in factor markets
Derived demand for labor
Market interventions
Topic
Factor Markets and Monopsonies
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.