Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Employment levels will decrease due to workers seeking alternative employment options.
B
Employment levels will increase as the monopsonist can hire more workers at lower wages.
C
Employment levels will remain unchanged because the monopsonist's demand for labor is inelastic.
D
Employment levels will decrease as workers will accept lower wages without changing their employment status.
Understanding the Answer
Let's break down why this is correct
Answer
A monopsonist is a single buyer in a market, such as a company that is the only employer in a town. If this company decides to reduce the wages it offers to workers, fewer people may want to work there because the pay is lower. As a result, some current employees might leave for better-paying jobs elsewhere, while potential new workers might choose not to apply. This can lead to a decrease in the overall employment level in that market because the company may struggle to fill positions. For example, if a factory lowers its wages, it might find that fewer applicants show up, reducing the number of workers it can hire.
Detailed Explanation
When a monopsonist lowers wages, workers may look for better jobs elsewhere. Other options are incorrect because Some might think that lower wages mean the company can hire more workers; It's a common belief that demand for labor doesn't change with wages.
Key Concepts
Monopsony
Labor Market Dynamics
Wage Determination
Topic
Understanding Monopsonies
Difficulty
medium level question
Cognitive Level
understand
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