At one point in time, a company had monopsony power in the town of Cornwall's labor market. But over time, new businesses moved to the area and the monopsony power was broken. What happened when the company lost its monopsony power?
A)Wage rates in Cornwall decreased.
B)Workers left the town in search of another monopsony market.
C)Wage rates in Cornwall increased.
D)The price of goods sold by the Cornwall company decreased.

Question

Quizplus · Accepted Answer

When the company lost its monopsony power, it could no longer dictate lower wages to the workers in the Cornwall labor market. This led to increased competition for labor and hence an increase in the wage rates in Cornwall. The price of goods sold by the Cornwall company may or may not have changed, but it is not directly related to the loss of monopsony power. Workers leaving the town in search of another monopsony market is also unlikely as there is no mention of such markets in the question. Therefore, the best choice is C.

At One Point in Time, a Company Had Monopsony Power