Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Workers typically receive lower wages compared to competitive markets.
B
The monopsonist can set wages above the equilibrium level due to increased competition.
C
Employment levels may be reduced as the monopsonist limits hiring to control costs.
D
The marginal revenue product of labor for the last worker hired tends to decrease as more workers are employed.
E
Monopsonies create a situation where workers have multiple alternatives for employment.
Understanding the Answer
Let's break down why this is correct
Answer
In a monopsony market, there is only one major employer, which gives them significant power over wages and hiring. Because this employer controls the job market, they can pay workers less than what they would earn in a competitive market. This can lead to lower wages and fewer job opportunities for workers since the employer does not have to compete for labor. For example, if a large factory is the only employer in a small town, they might offer lower wages because workers have no other options for jobs. As a result, workers may earn less and have less bargaining power compared to a situation where multiple employers are competing for their labor.
Detailed Explanation
Other options are incorrect because Some might think workers earn less in a monopsony; It's a common mistake to think a monopsonist can raise wages.
Key Concepts
Monopsony market structure
Labor market dynamics
Wage determination
Topic
Understanding Monopsonies
Difficulty
hard level question
Cognitive Level
understand
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