Scenario 14.1
A worker in Firm A earns an income of $5,000 per month. He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-Monopsonists tend to exploit the resources as they are the sole employers of the resources.

Question

Quizplus · Accepted Answer

Monopsonists have market power as they are the sole employers of the resources in a particular market. This market power enables them to pay a lower wage rate than would prevail in a competitive labor market. Therefore, workers may be exploited or receive lower pay than they would in a competitive labor market. In the given scenario, Firm B may be a monopsonist and could potentially offer a lower wage than the worker's marginal productivity would justify.

Scenario 14.1 A Worker in Firm a Earns an Income of $5,000