Monopsony

Evaluate the view that labour markets work best when strong monopsony power is balanced by trade union power.

Figure 8 shows the marginal cost (MC_L), average cost (AC_L) and marginal revenue product (MRP_L) curves for labour in a specialised computer programming industry.

Following a series of mergers between firms in this industry, a single large firm remains as a monopsony employer.

Which one of the following is the most likely to result from a competitive labour market being replaced by a monopsony employer?

Extract E (lines 5–7) states: ‘Until the 1990s, almost all workers in the care sector were employed by the government, which acted as a monopsonist by keeping wages low.’

With the help of a diagram, explain how a monopsonistic public sector can lead to low pay for social care work.

Figure 5 shows the market demand for labour (D_{L =} MRP_L), the market supply of labour (S_L=AC_L), and the marginal cost of labour (MC_L), in a particular industry. The employer in this industry is a monopsonist.

From Figure 5, it can be concluded that, in the absence of a trade union or a minimum wage, the firm will employ

In a labour market dominated by a monopsonist, wages and employment are usually lower than in a competitive labour market. This is because a monopsonist