A wage- setting union in a monopsonistic market:
A)can raise both wages and employment above the level set by the monopsonist.
B)can raise wages above the level set by the monopsony but only if it allows employment to fall below the level set by the monopsonist.
C)gains its wage and employment demands by presenting the employer with a perfectly inelastic supply of labour.
D)can raise wages to what would be the competitive level but no higher.

Question

Quizplus · Accepted Answer

In a monopsonistic market, where a single buyer (employer) controls the market, a wage-setting union can negotiate for higher wages and, by increasing the cost of labor, can also incentivize the employer to hire more workers to increase productivity and offset the higher wage costs. This can lead to both wages and employment levels rising above what the monopsonist would have set unilaterally.

A Wage- Setting Union in a Monopsonistic Market