A minimum wage law might increase wages without reducing employment if the hiring firm is
A)in perfect competition.
B)a monopolist.
C)a monopolistic competitor.
D)a monopsonist.

Question

Quizplus · Accepted Answer

A monopsonist is the only scenario in which a minimum wage law could potentially increase wages without reducing employment. A monopsonist is a single buyer in a market with many sellers, so they have market power to set wages below the marginal revenue product of labor. In this scenario, a minimum wage law would increase wages without affecting employment because the monopsonist is already paying less than the marginal revenue product of labor. In perfect competition, a monopolist, and a monopolistic competitor, a minimum wage law would likely reduce employment because firms in these markets do not have the same market power as a monopsonist.

A Minimum Wage Law Might Increase Wages Without Reducing Employment