All other things being equal, a monopsonistic firm pays a higher wage and hires fewer workers than do firms in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market.

Question

Quizplus · Accepted Answer

In a monopsony, where there is only one buyer (employer) in the market, the firm has market power and can set wages lower than in a competitive market, and it typically hires fewer workers than would be hired in a competitive market due to the wage rate it sets.

All Other Things Being Equal, a Monopsonistic Firm Pays a Higher