If an employer is a monopsonist,the imposition of a minimum wage set at a level that is less than the marginal revenue product but greater than the wage rate that the monopsonist wants to pay may actually increase the level of employment.

Question

Quizplus · Accepted Answer

This is because the monopsonist has market power in the labor market and can hire workers at a lower wage rate than in a competitive labor market. However, a minimum wage that is set above the monopsonist's preferred wage rate but below the marginal revenue product may attract more workers to the market, thereby increasing the pool of available labor. As a result, the monopsonist may increase employment levels to take advantage of the larger pool of workers.

If an Employer Is a Monopsonist,the Imposition of a Minimum