Monopsony power Flashcards
Graphically depict how a minimum wage in a monopsony can increase wages without increasing unemployment
A monopsony pays a wage of W2 and employs Q2.
If a minimum wage was placed equal to W1, it would increase employment to Q1.
A minimum wage of W3 would keep employment at Q2.
Give an example of a monopsony in the real world
there are several employers who might employ supermarket checkout workers. However, in practice, it is difficult for workers to switch jobs to take advantage of slightly higher wages in other supermarkets.
There is a lack of information and barriers to moving jobs. Therefore, although there are several buyers of labour, in practice the big supermarkets have a degree of monopsony power in employing workers
What are the problems related to monopsonys in the labour market?
Monopsony can lead to lower wages for workers. This increases inequality in society.
Workers are paid less than their marginal revenue product.
Firms with monopsony power often have a degree of monopoly selling power. This enables them to make high profits at the expense of consumers and workers.
Firms with monopsony power may also care less about working conditions because workers don’t have many alternatives to the main firm
Give 2 examples of monopsonys in product markets
Supermarkets have monopsony power in buying food from farmers. If farmers don’t sell to the big supermarkets, there are few alternatives. This has led to farmer protests about the price of milk.
Amazon.com is one of the biggest purchases of books. If publishers don’t sell to Amazon at a discounted price, they will miss out on selling to the biggest distributor of books.
