Compared to a competitive market, a firm that has a monopsony in a labour market would
A)hire fewer workers and pay higher wages.
B)hire more workers and pay lower wages.
C)hire fewer workers and pay lower wages.
D)hire more workers and pay higher wages.

Question

Quizplus · Accepted Answer

A monopsonistic firm has market power in the labour market and can therefore pay workers lower wages than they would receive in a competitive market. This is because there are fewer employment options for workers in a monopsony, which reduces their bargaining power. The firm may also choose to hire fewer workers in order to keep wages low. Therefore, the correct answer is C.

Compared to a Competitive Market, a Firm That Has a Monopsony