Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased prices for consumers
B
Decreased wages for workers
C
Higher quantity of goods produced
D
Elimination of deadweight loss
Understanding the Answer
Let's break down why this is correct
Answer
In a monopsony market, there is only one buyer for a certain type of labor or goods, which gives that buyer a lot of power over prices and wages. This means that the monopsonist can pay workers less than what they would earn in a competitive market, where multiple buyers compete for their services. For example, if a town has only one factory hiring workers, the factory can set lower wages because workers have fewer options for employment. As a result, workers may earn less and have less job security compared to a competitive market where several employers are vying for their skills. Ultimately, this buyer's market power leads to lower wages and less overall benefit for workers compared to a more competitive environment.
Detailed Explanation
In a monopsony, one buyer controls the market. Other options are incorrect because Some might think that if a buyer pays less to workers, prices for consumers will go up; It's a common belief that more buyers mean more goods.
Key Concepts
Monopsony definition
Deadweight loss
Competitive market dynamics.
Topic
Monopsony and Marginal Analysis
Difficulty
hard level question
Cognitive Level
understand
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