Explain how monopsony might affect the market for labor.
What will be an ideal response?
Monopsony leads to a smaller number of workers being hired and to lower wages.
Monopsony exists when only one employer is bidding for the services of many laborers;
that is, the labor market is not competitive. As the only demander, the employer in a
monopsony has the power to affect the wage level because workers do not have other
options if they want to work. Therefore, unemployed workers might be willing to accept
a wage lower than the prevailing wage if they are not able to move to an area with a
competitive labor market. The company moves down the positively sloped labor supply
curve, lowering the wages and increasing profits. When workers are paid less than their
marginal revenue product, they are in a sense being exploited.
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The above figure shows the market for college education in the United States. With no government intervention, the market equilibrium is at a tuition of ________ and ________ million students per year
A) 16,000; 14 B) $20,000; 10 C) $13,000; 10 D) $13,000; 17 E) $16,000; 10
Which of the following combinations would unambiguously increase the supply of money? a. The Fed pays a higher interest rate on bank reserves and increases the required reserve ratio
b. The Fed conducts an open market purchase of government securities and raises the discount rate. c. The Fed pays a higher interest rate on bank reserves and conducts an open market purchase of government securities. d. All of the above would produce conflicting effects on the supply of money