Asked by Jordyn Mercedes on Jul 01, 2024
Verified
A monopsony firm in a labor market hires fewer workers than would a competitive firm.
Monopsony Firm
A market situation where there is only one buyer or a dominant buyer for a product or service, giving that buyer substantial control over market prices and terms.
Competitive Firm
A business that operates in a market with many buyers and sellers, where no single entity can significantly influence the market price of goods and services.
- Understand the concept of monopsony in labor markets and its effects on employment and wages.
Verified Answer
AN
audrey nhamo7 days ago
Final Answer :
True
Explanation :
In a monopsony, where there is only one buyer (employer) in the labor market, the firm has market power and can set wages lower than in a competitive market. This leads to hiring fewer workers than a competitive firm would, as the monopsonist seeks to maximize profit by equating marginal revenue product with marginal factor cost, which occurs at a lower quantity of labor hired compared to a competitive market scenario.
Learning Objectives
- Understand the concept of monopsony in labor markets and its effects on employment and wages.