15. Labour Markets - Trade Unions in Monopsony Labour Markets Flashcards
What do trade unions do?
They bargain for higher wages and, if strong, control the supply of labour at a given wage rate
How will TUs act in monopsony markets?
TUs will see the gap between MRP of workers and wages and will then seek to negotiate a higher wage closer to the competitive market rate
What happens to monopsony’s at the new wage level?
They become wage takers - bc they cannot employ workers for less they have to accept the given wage - so the supply curve is horizontal for a period
At what point to monopsonists stop being price takers?
At the point where the horizontal section of the supply curve coming from the wage lvl on the y axis meets the upward sloping supply curve - workers who wld previously of supplied there labour at a wage lvl higher than the TUs negotiated lvl are not effected by the new ‘min wage’ so the supply curve for them is upward sloping still
How does the new wage level set by the TU influence the MC curve?
The new, totally elastic wage becomes both the new supply curve ( & AC) and MC curve bc while the AC is a flat line every worker is being employed at the same wage so MC is also consistent. But at the point where AC begins to slope upward again the MC curve jumps back to its equivalent point above on the original MC curve
Why does the MC curve jump back to its original curve?
Bc when the supply curve becomes upward sloping again firms have to raise wages to attract more workers - as they do this they have to raise wages for all workers - this makes the MC rise at a higher rate than AC
Up to what point will monopsonist hire workers?
Up to the point at which the MRP of workers = the MC of them
Assuming firms are profit maximising, what will the impact of a TU be on a monopsony market?
The TU will drive up wages and increase employment - moving both towards the competitive market lvl
What will determine the benefits a TU may bring to a monopsony market?
The extent to which the monopsony market is exploiting workers - measured by the difference between workers MRP and their wage - the bigger the difference the TU will make
