Monopsony Labor Markets: Effects and Interventions

The video tutorial explains the concept of monopsony, where a single buyer dominates the market, often seen in labor markets with one major employer like the government. It compares monopsony to perfectly competitive markets, highlighting how monopsony leads to lower wages and employment. The tutorial discusses interventions like trade unions and minimum wage laws to counteract monopsony effects, raising wages and employment. It questions the effectiveness and implications of such interventions on market efficiency.

What is a monopsony in the context of labor markets?

• A market with multiple buyers and sellers

• A market with only one buyer

• A market with no buyers

• A market with only one seller

In a monopsony labor market, why is the marginal cost of labor curve steeper than the average cost of labor curve?

• Because the firm pays the same wage to all workers

• Because the firm pays a lower wage to new workers

• Because the firm must increase wages for all workers when hiring an additional worker

• Because the firm does not change wages for existing workers

How does a monopsony affect wages and employment compared to a perfectly competitive labor market?

• Wages and employment are lower

• Wages are higher, but employment is lower

• Wages are lower, but employment is higher

• Wages and employment are higher

What role can trade unions play in a monopsony labor market?

• They can decrease wages

• They can protect workers' rights and increase wages

• They can eliminate the need for a minimum wage

• They can increase the number of firms

What is one potential downside of trade union intervention in labor markets?

• It can decrease wages

• It can slow down labor market efficiency

• It can reduce the number of workers

• It can increase market efficiency