The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia,with only one employer,a logging company.
FIGURE 14- 4
-Refer to Figure 14- 4.Compared to the outcome in a competitive labour market,the wage and employment outcome in this town's monopsonistic labour market are as follows:

Question

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia,with only one employer,a logging company.
  FIGURE 14- 4
-Refer to Figure 14- 4.Compared to the outcome in a competitive labour market,the wage and employment outcome in this town's monopsonistic labour market are as follows:

Quizplus · Accepted Answer

In a monopsonistic labour market, the employer has bargaining power and can pay a lower wage than in a competitive labour market. In the diagram, the monopsonistic equilibrium occurs at a wage of $25 and an employment level of 500. In a competitive labour market, the equilibrium wage would be $30 and employment would be at 750. Therefore, the difference is $5 per hour in wages and 250 units of labour in employment. Therefore, the correct choice is A.

The Diagram Below Shows the Supply and Demand for Labour