1. Labor Market Completion
Monopsony
Labor Market Completion

2. Monopsony
Definition: When one firm is the sole purchaser of a resource in the input market (factor market)
Therefore, a monopsony can not hire more workers without increasing wage rate
They are not “wage takers”
Example: only buyer of labor in a small town

3. Competitive Firm vs. Monopsony
A competitive firm in the input market
Hire labor where MRP = MFC
They are “wage takers”
A Monopsony (input market)
Can not hire more workers without increasing wage rate
MFCM is above supply curve of labor (S)

4. Monopsony Monopsony hires less inputs LM < LC
To hire more workers wages must rise
for all workers (not a wage taker!)
MFCM
S = MFCc
DL = MRPL
Competitive Input Industry
Wage WM LM
$10 =WC LC Ec EM
Qty-Labor
Bottom Line: Monsopony versus Competitive Input Industry:
Monopsony hires less inputs LM < LC
Monopsony firms pays less WM < WC

5. MICRO Final Exam Study Packet
Everything you need to prepare for the exam….