Two employers pay a wage of $10 an hour.Employer A is a monopsony while Employer B hires in a competitive labor market.Both firms sell their output in competitive markets.Which of the following will be true?
A) The marginal worker in both firms will add the same to the firm's revenue.
B) If a worker left employer A and joined employer B, the economy would be better off.
C) Employer A has a higher average wage cost per worker than Employer B.
D) It will cost employer A more to hire another worker.

Question

Quizplus · Accepted Answer

In a monopsony, the employer has significant control over the labor market and faces an upward-sloping labor supply curve. This means that to hire an additional worker, the monopsonist must increase the wage rate not only for the marginal worker but potentially for all workers, making it more costly to hire an additional worker compared to a firm in a competitive labor market.

Two Employers Pay a Wage of $10 an Hour