Microeconomics - The determination of relative wage rates and levels of employment in imperfectly competitive labour markets

Question 1

Monopsony power

Answer 1

When there is only one buyer of labour in the market, there is
said to be monopsony power. It means the firm has the ability to set wages.

Question 2

why is the mc curve steeper than the ac curve

Answer 2

The marginal cost of adding an extra worker is more than the average cost. This is
because in order to employ another employee the firm has to pay all of their
workers more

Question 3

what point is the profit maximisation point

Answer 3

where MC = MRP

Question 4

Positives of trade union power

Answer 4

If trade unions are pushing for higher wages above the market
equlibrium, the labour market is likely to be more flexible. Trade unions can also
increase job security. Higher wages can be demanded by limiting the supply of
labour, by closing firms, or by threatening strike action.

Question 5

negatives of trade union power

Answer 5

Higher wages could cause
unemployment, however

Question 6

imperfect information in the labour market

Answer 6

Some qualified workers might not be aware of higher paying
jobs in other industries or with other firms. Some workers might not understand the
long term benefits of investing in improving their skills and education. This can limit
the productivity and potential progression of workers. It makes the market
inefficient.