Monopsony and Trade Unions

Question 1

Monopsonist

Answer 1

Single buyer of labour

Question 2

Monopsonist wage rate

Answer 2

If monopsonists want to employ additional labour it must raise the wage rate for all workers, this means when attracting new workers the marginal cost of labour is greater than the existing average cost of labour

Question 3

Trade unions

Answer 3

Organisation representing the interests of its workers in negotiating improved worker conditions

Question 4

Effect of trade union on perfectly competitive market

Answer 4

Will create unemployment as at new wage rate demand falls (FBU cause multiple stations to close)

Question 5

Effect of trade union on monopsony

Answer 5

As WR and employment already below equilibrium when TU sets higher WR it also leads to higher employment
However if beyond equilibrium unemployment will rise due to the double kinked line XYZ