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 competitive labour market, the intersection of the supply and demand curves determines the equilibrium wage and employment level. However, in a monopsonistic labour market, the employer has some bargaining power and can pay a lower wage than the competitive wage in order to maximize profits. Therefore, in this monopsonistic labour market, the wage will be lower than the competitive wage, leading to a lower quantity of labour supplied and demanded. So, the outcome in this town's monopsonistic labour market is that the wage is lower by $5 per hour and employment is lower by 250 units of labour compared to the outcome in a competitive labour market.

The Diagram Below Shows the Supply and Demand for Labour