market failure in labour markets

Question 1

What is a monopsony?

Answer 1

Market in which the single buyer of a good service or factor of production. they are a wage maker

Question 2

where will a monopsony hire upto?

Answer 2

where MRP=MC. Here they will revenue maximise

Question 3

Why is the marginal cost of labour greater than the average cost in a monopsony?

Answer 3

An increase in the wage rate paid to attract one actual worker must also be paid to existing workers

Question 4

Draw and explain a monopoly diagram

Answer 4

The profit maximising level of employment is where the marginal cost of labour equates to the marginal revenue products of employing extra workers. This wage is below the marginal revenue product of the last worker therefore the monopolist is exploiting labour by not paying them the full value of their marginal revenue product. employment falls compared to in a perfectly competitive market and wages also fall

Question 5

What are the two main impacts that monopsony has on the labour market?

Answer 5

1) lower wages
2) fewer workers

The size of these will depend on the wage elasticity of demand and for supply of labour in the market where the demand is inelastic the extent to which employment can be forced down will be less than whether the demand is wage elastic
If workers can find employment elsewhere, the supply of labour will be relatively elastic and the employer will have less power