Monopsony Model

Tags:

PC labor market: employer hires too small an amount of labor to influence the wage rate
Monopsony= a market in which a single employer of labor has substantial buying (hiring) power
Characteristics:

only a single buyer of a particular type of labor
this type of labor is relatively immobile e.g. geographically or b/c workers would have to acquire new skills
firm is a 'wage maker' b/c the wage rate it must pay varies indirectly w/ the # of workers it employs

Example of pure monopsony power: silver-mining company is the only source of employment in a small town

Upward-Sloping Labor Supply to Firm

MRC higher than the Wage Rate

Equilibrium Wage and Employment

Examples of Monopsony Power

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