What is a monopsony?<\/strong><\/h3>\nA monopsony is a monopoly for labor. Think about Google for instance. Google is a monopoly in their field and a monopsony when hiring workers.<\/p>\n
[\/et_pb_text][et_pb_image src=”http:\/\/euseguros.pt\/wp-content\/uploads\/2021\/11\/monopsony-1.png” _builder_version=”4.4.3″][\/et_pb_image][et_pb_text _builder_version=”4.4.3″]<\/p>\n
By looking at the graph we start off with the Demand Curve which is downward sloping and the supply curve that is upward sloping. Nothing new here.<\/p>\n
The difference starts when the hire more workers: instead of increasing the wage for the additional worker, they increase for everyone – the workers that came before as well. This means that the Marginal Cost of Labor is higher than the Average Cost of Labor.<\/p>\n
The monopsonist has wage making power, and they will hire workers until MRP = MCL. this is the Revenue Maximization Point.<\/p>\n
So they will hire at Qm, but instead of paying at Wp (MRP), they will pay at Wm, creating a deadweight loss. Note that the wage is the Average Cost of Labor.<\/p>\n
In a perfect competitive market the wage would be set where Demand = Supply, more specifically where QL = WC.<\/p>\n
Here, the quantity is reduced from QL to Qm and instead of paying at Wp, wages are set lower at Wm.<\/p>\n
So, in comparison to a perfect compettive market, firms hire less workers and pay less. <\/p>\n
And another point to consider when analysing monopolies is that the greater difference between WRP(Wm) and Wm, the higher the monopsonist power.<\/p>\n
[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>","protected":false},"excerpt":{"rendered":"
A monopsony is a monopoly for labor. It is the company that is the sole employer of labor in a given profession.<\/p>","protected":false},"author":1,"featured_media":6752,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[152,153],"tags":[303,246,302],"yoast_head":"\n
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