Suppose the upward sloping labor supply curve shifts leftward in a labor market with a single employer (monopsony). What happens to the marginal expenditure curve?
A) Shifts left
B) Shifts right
C) Remains the same
D) We do not have enough information to answer this question.

Question

Quizplus · Accepted Answer

In a monopsony, the employer has the power to affect the wage rate and hire less workers than in a competitive labor market. If the labor supply curve shifts leftward, it means that fewer workers are willing to work at the current wage rate. As a result, the monopsonist needs to increase the wage rate to attract more workers. This increase in wage rate leads to an upward shift of the marginal expenditure curve. Thus, the correct answer is A: shifts left.

Suppose the Upward Sloping Labor Supply Curve Shifts Leftward in a Labor