Monopsony power exists in a labor market when there:
A)is a major seller of labor who can exert influence to sell at higher prices.
B)is a major buyer of labor who can exert influence to pay lower prices.
C)are many sellers of labor who each have little power but can still impact price.
D)are many buyers of labor who each have little power but can still impact price.

Question

Quizplus · Accepted Answer

Monopsony power exists in a labor market when there is a single buyer of labor who has the power to set wages lower than the competitive level, thereby exerting downward pressure on the price of labor. This can result in a reduction in employment, lower wages, and reduced output. Therefore, option B is the correct choice as it reflects the concept of monopsony power in a labor market.

Monopsony Power Exists in a Labor Market When There