Final answer:
A monopsonist will pay a lower price and purchase less compared to a competitive market, where the correct answer is option 2) a lower price and purchase less. This is because a monopsonist can exercise market power in setting wages and hiring, resulting in fewer employees and lower wages than in a perfect competition scenario.
Step-by-step explanation:
Compared to a competitive market, a monopsonist will pay a lower price and purchase less. Therefore, the correct answer is 2) a lower price and purchase less. In a perfectly competitive market, supply and demand would determine the wage (Wc) and the employment level (Lc), where D₁ = S₁. However, a monopsony, having unique market power as the sole buyer of labor, can set the wage (Wm) and decide on the level of employment (Lm), which results in hiring fewer workers than in a competitive market, and at a lower wage. This disparity arises because to maximize profits, a monopsonist hires up to the point where the marginal cost of labor equals their labor demand, which is not the equilibrium that would be found in a competitive labor market.