Suppose that a factory in a small city is the only employer for thousands of unskilled workers.The model that best fits this situation is:

Question

Quizplus · Accepted Answer

The situation described in the question is an example of monopsony, as there is only one buyer (the factory) for the unskilled labor in the small city. The factory has a significant degree of market power and can set the wage rate at a level below the equilibrium level in a competitive labor market, leading to wage suppression and exploitation of the workers. Monopsony power can also limit the number of jobs available in the industry, leading to reduced employment levels and lower economic efficiency.

Suppose That a Factory in a Small City Is the Only