The critical feature of a monopsonistic labor market is that the employer
A) has a perfectly elastic demand curve for labor.
B) can hire any number of workers it chooses at the going wage rate.
C) faces an upsloping labor supply curve.
D) faces a perfectly inelastic labor supply curve.

Question

Quizplus · Accepted Answer

In a monopsonistic labor market, the employer has market power and faces an upsloping labor supply curve. This means that as the employer tries to hire more workers, it must offer a higher wage to attract additional workers, leading to a higher overall wage rate than in a perfectly competitive labor market. The demand for labor is not perfectly elastic because the employer has some bargaining power over wages. The employer cannot hire any number of workers it chooses at the going wage rate because it faces an upward-sloping labor supply curve, which means that it has to pay a higher wage for each additional worker it hires. The labor supply curve is not perfectly inelastic because workers have some ability to choose between different jobs and occupations, even if some employers have more market power than others.

The Critical Feature of a Monopsonistic Labor Market Is That