Wage Rates In Imperfect Markets

Question 1

In a perfectly competitive market where do we operate (2)

Answer 1

At market equilibrium
Large number of small firms hiring large numbers of individual numbers

Question 2

How are wages determined

Answer 2

By the market

Question 3

Imperfectly competitive labour market who (M+M) (2)

Answer 3

Monopsony buyer of labour = NHS
Monopoly seller of labour = trade unions

Question 4

Diagram of imperfect market - monopsony operates (3)

Answer 4

Increases MC (wages)
Firms must increase wages (MC) to attract workers to industry = MC=MR
However firms pay workers at AC instead so wage falls and output is restricted

Question 5

How is avergae cost of labour calculated

Answer 5

Average cost of labour = total wage cost / quantity of workers

Question 6

What trade unions (3)

Answer 6

Organisation of workers that come together further own interests
Monopoly seller
Press for higher wages and can cause unemployment in isutries

Question 7

What do trade unions do (2)

Answer 7

Offer a higher wage rate = still nit were it should be though
The closer to the wage rate equilibrium = the more power the trade union has

Question 8

Power of trade unions (2)

Answer 8

The more militant the trade union the more costly it is to resolve disputes
The more profitable an employer is, the less power Trade Unions may have

Question 9

Trade unions efficiency (3+)

Answer 9

In imperfect markets may increase efficiency:
Push the wage closer to the market wage price
Lower costs for firms through looking after employees and listening to their problems
Will actually increase productivity in an economy