Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A single employer has the power to set wages below the competitive level.
B
Monopsony power leads to higher employment levels compared to competitive markets.
C
The marginal revenue product of labor is equal to the wage rate in a monopsony.
D
Workers have limited options for employment, which gives employers more bargaining power.
E
In a monopsony, the labor supply curve is perfectly elastic.
Understanding the Answer
Let's break down why this is correct
Answer
In a monopsony labor market, there is only one employer for many workers, which gives that employer significant power over wages and hiring practices. This means the employer can set lower wages because workers have fewer job options, making it hard for them to find better-paying jobs elsewhere. For example, if a single factory in a small town is the only place hiring, it can pay lower wages since workers rely on that factory for income. Additionally, the employer may not need to compete with other businesses for labor, allowing them to dictate job conditions. Overall, a monopsony leads to lower wages and can reduce the overall number of jobs available, as the employer may hire fewer workers than would be employed in a competitive market.
Detailed Explanation
In a monopsony, the employer has too much power, affecting wages and employment negatively. Other options are incorrect because It's a common belief that a single employer can set low wages; Some think monopsony leads to more jobs.
Key Concepts
Monopsony labor market
Wage setting and employment dynamics
Marginal revenue product
Topic
Monopsony Labor Market Analysis
Difficulty
easy level question
Cognitive Level
understand
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