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Monopsony
The Firm's Wage-Employment Trade-off
Labour Market Power (Monopsony Power)
Labour market power is a firm's capacity to influence the wage it pays by altering its level of employment. Specifically, it is the ability to pay a lower wage by hiring fewer workers. This concept is often used interchangeably with 'monopsony power' because the most extreme example of this power is found in a monopsony, where a single firm is the only employer in a labor market. However, labour market power is a more general principle and can exist even when firms face some competition for workers and employees have alternative job options.
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Social Science
Empirical Science
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Origin of the Term 'Monopsony'
Compounded Conflicts in the Polluting Monopsonist Model
Labour Market Power (Monopsony Power)
A small, isolated town has a single large factory that is the sole employer for the local workforce. Assuming the factory's goal is to maximize its profit, how would the wage and employment level in this town most likely compare to a similar town with many competing factories, all else being equal?
Labor Market Dynamics in an Isolated Town
Evaluating the Economic Impact of a Single-Employer Town
Match each market structure with its defining characteristic.
The Hiring Decision of a Sole Employer
In a market with a single buyer of labor, the total additional cost incurred by the firm for hiring one more worker is exactly equal to the wage that specific worker is paid.
A firm is the sole buyer of labor in a remote region. It currently employs 100 workers at a wage of 15.10 per hour. What is the firm's total additional cost for hiring that 101st worker?
Power Dynamics in a Single-Employer Town
The Cost of Hiring for a Single Buyer
Consider a labor market where a single large firm is the only employer. This firm pays a wage lower than what would be seen in a market with many competing employers. If the government introduces a binding minimum wage that is set above the firm's current wage but below the level where the firm's labor demand intersects its marginal cost of labor, what is the most likely initial impact on the level of employment at the firm?
Restricting Hiring to Lower Wage Costs
Labour Market Power (Monopsony Power)
Learn After
Search and Matching Frictions as a Source of Labour Market Power
Employer Competition Reduces Labour Market Power
Restricting Hiring to Lower Wage Costs
A company is the primary employer in a small town and faces an upward-sloping labor supply curve, meaning it must offer a higher wage to attract more employees. From the company's perspective, what is the relationship between the wage it pays and the marginal cost of hiring one more worker?
Minimum Wage Impact in a Single-Employer Town
Strategic Hiring Decision for a Dominant Employer
Hiring Decisions and Wage Setting with Labor Market Power
A firm can only possess the ability to influence the wage it pays by altering its hiring levels if it is the sole employer in a specific labor market.
Match each characteristic to the type of firm it describes, based on the firm's position in the labor market.
A firm with the power to influence wages by changing its hiring level maximizes its profit by hiring workers up to the point where the marginal revenue product of labor equals the marginal cost of labor. At this profit-maximizing level of employment, the wage the firm pays is ________ the marginal revenue product of the last worker hired.
A firm is the dominant employer in a town and therefore has the power to influence the wage rate by adjusting its level of employment. To maximize its profit, the firm follows a specific sequence of steps to determine how many workers to hire and what wage to offer. Arrange the following steps in the correct logical order that such a firm would follow.
Evaluating a Policy to Counteract Labor Market Power
Profit Maximization for a Firm with Labor Market Power
Monopsony in a Company Town
Non-Compete Clauses as a Strategy to Increase Monopsony Power