Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A single company in a small town raises wages to attract workers away from a competing firm.
B
An employer lowers wages significantly, resulting in a labor shortage as workers seek jobs elsewhere.
C
A large corporation offers higher wages to ensure they can fill specialized positions that few workers can perform.
D
An employer maintains a fixed wage while the demand for labor increases, leading to a decrease in available workers.
Understanding the Answer
Let's break down why this is correct
Answer
In a monopsonistic labor market, there is only one major employer that hires workers, giving that employer significant power over wage determination. This means the employer can set lower wages because workers have limited options for employment. For example, if a small town has only one factory, the factory owner can offer a wage that is lower than what workers might earn in a more competitive market. As a result, workers may have to accept this lower wage because they have no alternative job opportunities nearby. This scenario shows how the employer's power affects wage levels and can lead to lower earnings for workers compared to a competitive labor market.
Detailed Explanation
In a monopsony, one big employer has power over wages. Other options are incorrect because This option suggests a competition between companies; This example shows a drop in wages causing a shortage.
Key Concepts
Monopsony in Labor Markets
Wage Determination
Labor Supply and Demand Dynamics
Topic
Monopsony in Labor Markets
Difficulty
hard level question
Cognitive Level
understand
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