In a monopsony labor market, a minimum wage will necessarily increase unemployment.

Question

Quizplus · Accepted Answer

In a monopsony labor market, where there is only one buyer (employer) of labor, setting a minimum wage above the current equilibrium wage can actually increase employment by forcing the monopsonist to pay a higher wage, which can lead to an increase in the quantity of labor demanded up to the point where the new minimum wage intersects the labor supply curve.

In a Monopsony Labor Market, a Minimum Wage Will Necessarily