Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Higher wages for all workers compared to a competitive market
B
Inefficient allocation of labor leading to lower overall employment
C
Increased job security for employees due to employer's control
D
Equal bargaining power between employers and employees
Understanding the Answer
Let's break down why this is correct
Answer
In a monopsony labor market, there is only one main employer for a certain type of job, which gives that employer a lot of power over wages. This means that the employer can decide to pay lower wages than they would 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 because workers have fewer options for employment. As a result, workers may end up earning less than they would if they could choose among many employers. Overall, the firm's market power often leads to lower wages and reduced benefits for workers in a monopsony.
Detailed Explanation
In a monopsony, one employer has a lot of power over wages. Other options are incorrect because Some might think that a powerful employer pays higher wages; It's easy to think that more control means more job security.
Key Concepts
labor demand
monopsonistic competition
market intervention.
Topic
Monopsony Labor Market Analysis
Difficulty
hard level question
Cognitive Level
understand
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