In a monopsony labour market, a minimum wage set equal to the competitive market equilibrium wage rate can _______ the wage rate and _______ employment.
A) lower; decrease
B) lower; increase
C) raise; decrease
D) raise; increase

Question

Quizplus · Accepted Answer

In a monopsony labor market, a minimum wage set at the competitive market equilibrium wage rate can raise the wage rate because it sets a floor that is likely above what the monopsonist would pay. It can also increase employment because the monopsonist must now hire more workers at the higher wage rate to meet their labor needs, overcoming the monopsony power that previously allowed them to hire fewer workers at lower wages.

In a Monopsony Labour Market, a Minimum Wage Set Equal