Imperfect labour market

Question 1

What are monopsony assumptions?

Answer 1

• Firm operates in perf. comp. output market
• Firms and workers have complete info
• Workers are wage takers
• The firm is a wage maker in the labour market

Question 2

What is the monopsony market structure?

Answer 2

• Many small sellers (workers)

- One large buyer (firm)

Question 3

What is the market supply curve in a monopsony?

Answer 3

• The one firm’s supply curve
• Average cost curve
• S = ACL = wage

Question 4

What is the market structure for a monopoly union?

Answer 4

• Workers are wage makers
• There is one large seller (of labour)
• Many small buyers

Question 5

Whats an upside and downside to monopoly union?

Answer 5

• Union members have increased wages

- Higher wages mean reduced employment

Question 6

If unions can increase wages:

Answer 6

• It increases firms costs

- Some firms will have to exit the industry

Question 7

What is a bilateral monopoly?

Answer 7

When there is a single firm demanding jobs and a single union supplying workers