Monopoly in the labor market

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Presentation transcript:

Monopoly in the labor market Monopsony Monopoly in the labor market

Monopsony A monopsony must ↑ wage rate to hire more workers Definition: When one firm is the sole purchaser of labor in the factor market Example: only buyer of labor in a small town A monopsony must ↑ wage rate to hire more workers NOT A WAGE TAKER! End Result: a Monsopony will pay a LOWER WAGE & HIRE LESS WORKERS

Monopsony Monopsony hires less inputs LM < LC To hire more workers wages must rise for all workers (not a wage taker!) MFCM S = MFCc DL = MRPL Competitive Factor Industry Wage ---------------- ------------------ WM LM --------------------- ------------- $10 =WC LC Ec EM Qty-Labor Bottom Line: Monpsony versus Competitive Input Industry: Monopsony hires less inputs LM < LC Monopsony firms pays less WM < WC