Question

Please provide 2-3 sentences answering each question

1,What is a potential problem that could arise when a government wants to regulate a monopsony with a minimum wage?

2，What is a best response?

3，Is price discrimination always bad for all consumers?

Answer 1

1. A Monopsony is a market structure characterized by a single employer and many employees and prospective employees looking for jobs. This market operates for profit maximization and thus offers a lower than perfectly competitive wage rate.

When government regulates the monopsony with a minimum wage set higher than monopsony wage rate, then supply of labor would exceed demand for labor, leading to positive unemployment

2. Best response is the best possible response strategy of one player or firm, as a result of strategy chosen by the other player.

3. No

In some cases, price discrimination lowers down market prices and increase consumer welfare, when firms try to maximize their consumer reach by lowering down the prices