Monopsony

Question 1

What is a monopsony labour market?

Answer 1

This is when workers can not choose between alternative employers, since there is only one firm or employer available to hire them. - e.g. the government, close to being the sole employer of teachers and healthcare (NHS)
- the single employer has significant power when negotiating, and can drive down wages. The degree of power the monoponist has depends on the proportion of the employees in a market employed by them

Question 2

When will the employer hire extra workers?

Answer 2

They will hire extra workers as long as the workers adds more to revenue that to costs.

Question 3

Is a monopsony a price taker?

Answer 3

No, it is a price maker

Question 4

What happens to wages and quantity of employment with monopsonys?

Answer 4

Both wages and quantity of unemployment decrease

Question 5

What does a trade union do to an monopsony?

Answer 5

They increase wages and quantity of unemployment
- by how much depends upon the monopsony and the power of the trade union