Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Monopsony leads to lower wages for workers compared to competitive markets.
B
Employers in a monopsony must raise wages to attract additional workers.
C
Monopsonistic employers can hire unlimited workers without increasing wages.
D
Monopsony can create barriers to entry for potential competitors in the labor market.
E
Workers in a monopsony have equal bargaining power as those in competitive markets.
Understanding the Answer
Let's break down why this is correct
Answer
Monopsony occurs when there is only one buyer in a labor market, meaning one employer has significant control over wages and employment conditions. This can lead to lower wages for workers because the employer does not have to compete with other companies for labor. For example, if a small town has only one factory, that factory can pay less since workers have few options for other jobs. As a result, employees may earn less than they would in a competitive market, where multiple employers drive wages higher. Overall, monopsony can reduce job opportunities and lead to less favorable working conditions for employees.
Detailed Explanation
Other options are incorrect because Many think that fewer employers mean higher wages; Some believe that employers must raise wages to get more workers.
Key Concepts
Monopsony in Labor Markets
Wage Determination
Labor Market Dynamics
Topic
Monopsony in Labor Markets
Difficulty
medium level question
Cognitive Level
understand
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