Which of the following statements is TRUE when comparing monopsony and competitive labor markets?
A) The monopsony hires more workers but pays a lower wage.
B) The monopsony hires more workers at a higher wage.
C) The monopsonist's wage is lower and quantity of labor higher than would prevail under competition.
D) The monopsonist's wage and quantity of labor are lower than would prevail under perfect competition.

Question

Quizplus · Accepted Answer

In a monopsony market, there is only one buyer (or employer) for a particular type of labor, giving the employer market power to influence the wage rate. Therefore, the employer can pay a lower wage to the workers and hire more workers than would be hired in a competitive labor market. As a result, the monopsonist's wage rate and quantity of labor employed are lower than what would be present under perfect competition.

Which of the Following Statements Is TRUE When Comparing Monopsony