Question

1. A monopsony has market power and will pay ________ wages than a(n) ________ labor market...

1. A monopsony has market power and will pay ________ wages than a(n) ________ labor market will pay.

A. more; competitive

B. more; noncompetitive

C. less; competitive

2. When a union in the U.S. is able to sell its labor to for-profit businesses, those business must ________.

A. pay wages exactly where the demand and supply labor curves intersect

B. pay wages below the market equilibrium for wages

C. pay wages matching the preferred equilibrium wage chosen by these businesses

D. pay wages above the market equilibrium for wages

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Answer #1

1) option C is correct. competitive market uses labour demand and labour supply function to determine wage and employment. Monopsony uses the labour demand and marginal cost of labour function. This marginal cost of labour function has a greater slope which means the quantity of labour hired is reduced. It then uses the labour supply curve to determine the wage rate which is obviously less than the competitive wage because of lower employment

2) option d is correct. union wages are higher than equilibrium wages in the market because union negotiate with the management to push their wages up.

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