Micro Unit 5, Question 12: Monopsony

The video tutorial explains the concept of perfect competitive resource markets and introduces monopsony, a market condition where a single firm is the sole employer. It discusses how monopsony differs from perfect competition, particularly in terms of wage setting and marginal resource cost. The tutorial also covers how equilibrium wage and quantity are determined in a monopsony, highlighting the differences in hiring and wage levels compared to a perfectly competitive market.

What is a monopsony in the context of labor markets?

• A market with multiple firms hiring workers

• A market with no firms hiring workers

• A market where workers set their own wages

• A market with only one firm hiring workers

Why is the marginal resource cost higher than the wage in a monopsony?

• Because the firm pays each worker a different wage

• Because the firm can wage discriminate

• Because the firm can hire unlimited workers at a fixed wage

• Because the firm has to pay all workers the same higher wage

In a monopsony, where do firms hire workers?

• Where marginal revenue product equals marginal resource cost

• Where supply equals demand

• Where the wage is highest

• Where the number of workers is maximized

How does the employment level in a monopsony compare to a perfectly competitive market?

• Unpredictable in a monopsony

• The same in both markets

• Lower in a monopsony

• Higher in a monopsony

What wage do workers receive in a monopsony compared to a perfectly competitive market?

• Higher in a monopsony

• Lower in a monopsony

• The same in both markets

• Unpredictable in a monopsony