Question

True or false: An increase in the minimum wage will always increase employment if employers have monopsony power.

Answer 1

The statement given is true.

Rise in minimum wage is always cause increase employment if employers have monospony power. Monospony power comes to turn  when one buyer or union of them can dictate the amount paid to suppliers. It can also explained as the control on other factors in relationship within the suppliers and themselves. in competitive markets MRP s and the wages of workers are equal. And in other hand MRP s will higher than real wages in monopony organizations. thus, it is observed   in competitive labor market unemployment is increased with ride in minimum wages. But the minimal wages will rise if the employee in monospony with rise in employment.