Trade Unions In A Monopsony

Question 1

In a monopsony diagram…. (employment, wage rate)

Answer 1

Quantity of workers employed = less than a competitive market wages = less than competitive market

Question 2

Trade unions

Answer 2

Control supply of labour are given wage rates

Question 3

A strong trade union makes monopsonist….

Answer 3

Wage taker

Question 4

Why do trade unions increase wage rates above monopsonist WR?

Answer 4

Monopolist wage rate is way less than MRP of workers

increasing wage rate makes better off

Question 5

What happens wage rate WTU?

Answer 5

Monopsonist becomes wage taker, up until limit - limit is no. of workers willing to work at WTU

Question 6

When does the monopolist stop being a wage taker?

Answer 6

When all the workers willing to work at WTU have been employed

Question 7

What happens after workers have been employed at WTU?

Answer 7

Monopsonist increases wage to incentivise workers to work for them

Question 8

What happens when the monopsonist increases the wage rate?

Answer 8

Wage rate increases for the new additional worker, and ALL PREV workers

Question 9

What happens to the supply curve when wage rate increases for the new additional worker, and ALL PREV workers

Answer 9

Marginal cost of labour reverts back to its original

Question 10

What does the MCL curve have?

Answer 10

Vertical discontinuity

Question 11

Where does the monopsonist hire workers up until?

Answer 11

MRP = MCL (profit maximisation)

Question 12

What effect do trade unions have in monopsony labour markets?

Answer 12

Increase wage rate towards more competitive labour market outcomes
Increase employment towards more competitive labour market outcomes

Question 13

Why are trade unions good for a monopsony

Answer 13

Improves efficiency

Question 14

How do you measure the degree of monopsony power?

Answer 14

Compare wages to MRP

Question 15

When does the monopsonist have significant control?

Answer 15

When there’s a big difference between wage offered and MRP

Question 16

Relation between wage offered&MRP and benefit of trade union

Answer 16

The bigger the difference between wage offered and MRP when a trade union intervenes, the bigger the benefit the TU brings to the market and therefore the greater the efficiency gains

Question 17

What are the outcomes of the trade union has a lot of power

Answer 17

The greater the power of TU, the closer to the MRP or p.comp market wage rate

Question 18

Trade unions in a monopsony counter the view that

Answer 18

Trade unions raise WR and destroy jobs

Question 19

What can trade unions do in a monopsony labour market?

Answer 19

Save jobs

Prevent employers paying workers well below the MRP of their labour