FIGURE 14- 2
-Refer to Figure 14- 2. Suppose the labour market is in a monopsonistic equilibrium. If a minimum wage is then imposed at W5, the effect would be to

Question

Quizplus · Accepted Answer

In a monopsonistic market, the employer has market power to set the wage rate below the marginal revenue product of labour. This results in a lower wage rate and lower employment level than the competitive market. If a minimum wage is imposed at W5, it would increase the wage rate and maintain employment but create a pool of unemployed workers, as the employer would be reluctant to hire more workers at the higher wage rate. Therefore, the correct choice is D.

FIGURE 14- 2 -Refer to Figure 14- 2. Suppose the Labour Market Is