Micro 46 Monopsony

Question 1

In the labour market, a monopsonist has market market power because?

Answer 1

There is only one buyer of labour.

Question 2

Define monopsonist?

Answer 2

Single buyer of a certain type of labour or product.

Question 3

What examples of monopsonistic are there in labour markets?

Answer 3

• NHS
• State schools

Question 4

What examples of monopsonistic are there in product markets?

Answer 4

• Supermarkets
• Amazon
• Drug cartels

Question 5

What is the market supply curve also knows as?

Answer 5

AC curve.

ADD DIAGRAM

Question 6

Why is the MC curve different to the AC curve?

Answer 6

Because to add an extra worker, the monopsony must raise the wages of each worker, including the previously employed workers. And so the MC is always higher than the AC.

Question 7

Where is the equilibrium employment level and wage rate?

Answer 7

MC = MRP

Question 8

Draw the diagram for monopsonists paying the lowest possible wage?

Answer 8

ADD DIAGRAM

Question 9

How does the market equilibrium compare to that in a perfect competitive labour market?

Answer 9

MRP = AC would be higher.
The monopsony hires less workers and pays less compares to the competitive marker.

Question 10

Why can a monopsony get away with paying below the MRP levels of employees?

Answer 10

Because they know they are the sole buyer of labour.
(The more power the monopsony has, the lower the wages)