bilateral monopoly Flashcards
1
Q
bilateral monopoly analysis
A
- in a perfectly competitive labour market the market equilibrium wage rate and quantity of labour employed would be where labour supply equals labour demand (MRP)
- when a monopsony exists, the monopsonist will hire labour up to where MCL = MRP
- they will employ QM labour, to get workers to supply QM the monopsony needs to pay a wage equal to WM.
- therefore the monopsony has been able to cut down the wage rate from WC to WM by employing fewer workers
- at this quantity the firm can afford to pay WTU
- the supply curve with a trade union is now horizontal at WTU which is the highest possible wage the trade union can successfully negotiate at QM
2
Q
evaluating bilateral monopoly
A
- wage rate and quantity can both increase by negotiating
( monopsony graph )
