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In the case of a monopsony, do higher wage rates necessarily imply fewer persons working?

(a) True
(b) False

User Peter Fine
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1 Answer

4 votes

Final answer:

Higher wage rates do not necessarily imply fewer persons working in a monopsony. False

Step-by-step explanation:

In the case of a monopsony, higher wage rates do not necessarily imply fewer persons working. A monopsony is the sole employer in a labor market and can pay any wage it chooses, but it is still subject to the market supply of labor.

When a monopsony offers too low a wage, it may not find enough workers willing to work for them. However, if the monopsony offers a higher wage, it can attract more workers and increase employment.

To maximize profits, a monopsonist will hire workers up to the point where the marginal cost of labor equals their labor demand. This can result in a lower level of employment than in a competitive labor market, but it does not necessarily mean that higher wage rates imply fewer persons working.

User Deedubs
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