Monoposony

Question 1

Monopsonies are not wage takers

Answer 1

They face a upward sloping labour supply curve. They can choose any point on its demand curve by choosing a price or quantity of ouput

Question 2

Firm is a profit maximiser and will hire

Answer 2

Labour only up until the point where MC equal MR which means hiring labour up until the point where MRPL equal MCL. Therefore firm will hire Qm labour which require them to pay WRM

Question 3

In competitive outcome where wage rate equals MRPL

Answer 3

Where MC equals MR in a competitive market it can hire as much as it wants as the wage rate and the horizontal supply curve for the supply of labour to the firm. The wage rate is the average cost of labour and the marginal cost of labour.

Question 4

Hiring Qc labour would require the monopolist to hire workers

Answer 4

For MCl > MRPl so firm would make a hiring any worker between Qm and Qc.

Question 5

This is imcompatiable with profit maximisation

Answer 5

Firm hires fewer workers than competitive firm (Qm>Qc) and pays those workers lower wages (WRm<WRc).