Because the marginal cost of labour curve lies above the labour supply curve, a monopsony will pay a wage that is
A) equal to value of marginal product.
B) less than the wage paid in a competitive market.
C) equal to the wage paid in a competitive market.
D) greater than value of marginal product.

Question

Quizplus · Accepted Answer

In a monopsony, where there is only one buyer (employer) in the labor market, the employer has the power to set wages. Because the marginal cost of labor curve lies above the labor supply curve, the monopsonist will pay a wage that is less than what would be paid in a competitive market, where wages are determined by the intersection of supply and demand.

Because the Marginal Cost of Labour Curve Lies Above the Labour