-If there is a monopsony operating in the labor market illustrated in the figure above and the federal government decides to institute a minimum wage of $8 an hour then the wage paid will ________ and the quantity of labor hired will ________.

Question

Quizplus · Accepted Answer

In a monopsony, the employer has market power and pays a lower wage than in a competitive market. Instituting a minimum wage above the monopsony wage increases the wage paid and can increase the quantity of labor hired, as it moves the market closer to a competitive equilibrium.

-If There Is a Monopsony Operating in the Labor Market