With a monopsony in the labor market, a union can often raise wages and the number of workers hired.

Question

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A monopsony in the labor market refers to a situation where there is only one buyer of labor services. In this case, the employer has market power and can pay lower wages than the competitive market equilibrium wage. However, when a union bargains collectively for higher wages and better working conditions, it can increase the bargaining power of workers and push wages closer to the competitive market equilibrium. This can also lead to an increase in the number of workers hired, as the monopsonist employer may need to compete for labor with other firms in the market. Therefore, a union can often raise wages and increase employment in a monopsonistic labor market.

With a Monopsony in the Labor Market, a Union Can