Monopsony in the labour market Flashcards
1
Q
what is a monopsony in the labour market
A
Only one buyer of the labour – therefore in order to increase labour force they have to increase wages – an increase in the wage for one increases wage for all – therefore MC curve is above the supply curve (AC) of labour – as it costs more to employ an additional worker than the average cost of labour
2
Q
how do firms determine how many workers to employ
A
A firm will determine how many workers to employ where the cost of employing them = value of the worker to the firm
3
Q
diagram
A
They employ where MC=D at Q1 at this output they will pay their workers W1
