If we compare the wage rate and the level of employment achieved in a competitive labour market with those in a monopsonistic labour market, the latter will generate

Question

Quizplus · Accepted Answer

In a competitive labour market, firms have no power to set wages and are price takers in the market. Therefore, the wage rate is determined by the intersection of the supply and demand for labour, and the level of employment is relatively high. However, in a monopsonistic labour market, there is only one buyer of labour (the firm), and it has market power to set wages below the competitive level. This leads to a lower wage rate and a lower level of employment as the firm hires fewer workers at the lower wage. Therefore, option B is the correct choice.

If We Compare the Wage Rate and the Level of Employment