In a monopsony labor market, the single employer has the power to set wages, meaning that to attract more workers, they must increase wages, creating a situation where the wage is often lower than in a competitive market due to the lack of __________.

In a monopsony labor market, there is only one employer who hires workers, which gives that employer a lot of power over wages. Because there are no competing employers to offer better pay, the monopsonist can set wages lower than what workers might earn in a competitive market. To attract more workers, the employer must raise wages, but even then, the wages may still be less than if there were multiple employers vying for the same workers. For example, if a town has only one factory that hires workers, the factory can pay lower wages because people have few other job options. This situation occurs due to the lack of competition among employers for labor, which typically drives wages up in a more competitive market.