A monopsonist's wage cost in hiring an additional worker is the
A) worker's wage rate.
B) worker's wage rate plus the wage increases paid to all workers already employed.
C) worker's wage rate adjusted for the lower price that must be charged for the extra output.
D) marginal wage cost less the wage rate.

Question

Quizplus · Accepted Answer

A monopsonist is a single buyer or employer in a market. Therefore, they have the power to affect the wage rate by offering a lower wage than what would prevail in a competitive market. When a monopsonist hires an additional worker, they not only have to pay the worker's wage rate but also the wage increases paid to all workers already employed. The reason for this is that the monopsonist must increase the wage rate for all workers to prevent them from leaving for another job in a competitive market. Therefore, the monopsonist's wage cost in hiring an additional worker is B - worker's wage rate plus the wage increases paid to all workers already employed.

A Monopsonist's Wage Cost in Hiring an Additional Worker Is