1. Lectures in Microeconomics-Charles W. Upton Labor Monopoly and Monopsony

2. The Monopoly Suppose we have a a monopoly industry.

3. Labor Monopoly and Monopsony The Monopoly Suppose we have a a monopoly industry. The firm still has a MPP curve

4. Labor Monopoly and Monopsony The Monopoly Suppose we have a a monopoly industry. The firm still has a MPP curve However we are not interested in VMP = MPP * P But MRP = MPP *MR

5. Labor Monopoly and Monopsony The Monopoly The monopolist’s demand function is determined by MRP, not VMP. wowo LoLo MRP= MPP x MR

6. Labor Monopoly and Monopsony The Monopoly The monopolist’s demand function is determined by MRP, not VMP. Since MR < P, MRP < VMP. wowo LoLo MRP= MPP x MR

7. Labor Monopoly and Monopsony The Monopsonist A monopoly is a sole seller; a monopsonist is a sole buyer.

8. Labor Monopoly and Monopsony The Monopsonist A monopoly is a sole seller; a monopsonist is a sole buyer. As a monopolist worries about MR, a monopsonist worries about MCF

9. Labor Monopoly and Monopsony The Monopsonist w N S NoNo wowo

10. Labor Monopoly and Monopsony The Monopsonist w N S w* wowo N*NoNo

11. Labor Monopoly and Monopsony The Monopsonist wowo NoNo w* N* S

12. Labor Monopoly and Monopsony The Monopsonist w N S VMP MCF VMP

13. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N*

14. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive

15. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market

16. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market Competitive market with monopsony labor market

17. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N* Equilibrium if both markets are competitive Monopolist with competitive labor market Competitive market with monopsony labor market Monopoly market with monopsony labor market

18. Labor Monopoly and Monopsony The Monopsonist/Monopolist w N S VMP MCF VMP MRP N*

19. Labor Monopoly and Monopsony Two Issues Is this exploitation?

20. Labor Monopoly and Monopsony Two Issues Is this exploitation? –In the sense that the workers are not being paid the VMP, it is.

21. Labor Monopoly and Monopsony Two Issues Is this exploitation? Price Discrimination

22. Labor Monopoly and Monopsony Two Issues Is this exploitation? –In the sense that the workers are not being paid the VMP, it is. Price Discrimination –Confidential salaries –Moving expenses and hiring bonuses

23. Labor Monopoly and Monopsony End ©2006 Charles W. Upton