1. Monopsony, Unions, & Bilateral Monopoly Labor Markets
Imperfectly Competitive Labor Markets

2. Monopsony Model Critical Attributes of Monopsony Labor Markets:
There is a single buyer of a certain labor type
Movement of labor is restricted, either geographically or because workers would have to acquire new skills
The employer is a “wage maker,” because the wage rate it must pay varies directly with the number of workers it employs

3. Graphing Monopsony Upward sloping supply curve
S = ARC
The more workers a firm attempts to employ the higher the wage they must offer
MRC is higher than the wage
If monopsonists increase wages, they must do so for all workers they employ
Equilibrium wage & employment
Monopsonists hire the quantity of workers at MRC = MRP, at the wage on the supply curve directly below MRC = MRP

5. Unions Union: a cooperative collective of laborers
Unions usually seek to raise wages
Demand enhancement (increase product demand, increase productivity, or change the price of other inputs)
Exclusion (reduce the supply of labor)
Inclusion (increase the size of the union)
Unions typically achieve higher wage rates, but at lower levels of employment
Unions shift the MRC & supply curve and/or demand curve (remember: D = MRP)

6. Union Demand Enhancement

7. Exclusive Unionism

8. Inclusive Unionism

9. Bilateral Monopoly A monopsonistic labor market that is unionized
Example: the auto industry
Indeterminate outcome …depending on bargaining between the union and employer… between Wm and Wu

10. Practicing Imperfectly Competitive Labor Markets
Workbook Unit 4 Lesson 3 Activity 49
Homework: Chapter 26 #2, 3, 7, 8, 9