13. Labour Markets - Monopsony Labour Markets

Question 1

What is a monopsony?

Answer 1

The sole employer of labour in a given industry

Question 2

Give two examples of professions dominated by a monopsony employer in the UK?

Answer 2

Teaching and Nursing are both dominated hugely by the state as a monopsony employer

Question 3

How to monopsony employers differ from competitive market employers?

Answer 3

Monopsony employers have got significant hiring power over workers so they are price makers

Question 4

What will monopsony employers do regarding profits and how?

Answer 4

They will profit maximise by employing up to the point where the MRP of a worker is = to there MC

Question 5

Why does the monopsony market diagram look as it does?

Answer 5

Downward sloping demand & MRP bc of LoDRUpward sloping supply (=AC) bc the firm has wagemaking abilityUpward sloping and 2x as steep MC curve bc if the firm wish to hire an extra worker they have to increase the wage paid to all workers not just the extra one - therefore MC rises faster than ACFirms will produce where MRP = MC - read off the supply curve to get the monopsony wage rate

Question 6

What does the monopsony diagram show monopsonists do to employment and wages compared to in a competitve market?

Answer 6

It shows both employment and wages arelower in a monopsony market

Question 7

What does the monopsony diagram show about workers pay compared to there MRP?

Answer 7

It shows that workers are getting paid a wage rate far less than their actual MRP - workers are being exploited by monopsony employers

Question 8

What can we deduce from the difference between wages and MRP of workers?

Answer 8

The greater the difference between MRP of workers and thier actual wage - the greater the monopsony power in that industry