In order to hire an additional worker, a monopsony must pay
A) the same wage rate it paid before.
B) a higher wage rate than it paid before.
C) a lower wage rate than it paid before.
D) a wage rate that is sometimes higher, sometimes lower and sometimes the same as before, depending on the elasticity of the supply of labour.

Question

Quizplus · Accepted Answer

In a monopsony, where there is only one buyer (employer) in the labor market, to attract an additional worker, the employer must offer a higher wage not only to the new worker but also to all existing workers due to the upward-sloping supply curve of labor. This results in a higher wage rate than previously paid.

In Order to Hire an Additional Worker, a Monopsony Must