In a monopsony, the employer has the power to set wages below the equilibrium level without affecting the quantity of labor supplied, as workers have no alternative employment options.

In a monopsony, a single employer dominates the job market, meaning they are the only option for workers looking for jobs in that area. Because there are no other employers, this powerful employer can pay lower wages than what would typically be seen in a competitive market, where multiple employers are vying for workers. For example, if a town has only one factory that hires workers, that factory can offer lower pay since people have no other place to work. Workers may accept these lower wages because they need a job, demonstrating how the lack of alternatives allows the employer to influence pay. This creates a situation where the employer benefits, but workers may struggle with lower income and fewer choices.