For a monopsonistic hirer of labor the gap between labor's marginal value product and its wage rate will be greater
A)the more elastic the supply curve for labor.
B)the more inelastic the supply curve for labor.
C)the more elastic the firm's demand for labor.
D)the more inelastic the firm's demand for labor.

Question

Quizplus · Accepted Answer

In a monopsonistic market, the employer has market power and therefore can pay a wage lower than the marginal product of labor. The greater the gap between the wage rate and the marginal product of labor, the greater the exploitation of labor. This gap will be greater if the supply curve for labor is more inelastic because inelastic supply means that the labor force cannot easily find alternative employment options. Therefore, the monopsonistic firm can exploit workers by setting a lower wage rate without fearing that workers will leave to work for other firms.

For a Monopsonistic Hirer of Labor the Gap Between Labor's