Which of the following is likely to reduce the impact of a monopsony? a. Absence of...

Which of the following is likely to reduce the impact of a monopsony?

a. Absence of competing firms

b. Higher search costs

c. An increased ability of workers to relocate elsewhere

d. Higher movement and information costs

Solutions

Expert Solution

Monopsony refers to a market condition in which there exists a single buyer.

Monopsony is, generally, related to labor market where there is a single firm employing the labor.

This given immense power to monopsony to decide the wage and level of employment.

Such power of monopsony is due to following reasons -

1. There are no other firms in the market than can make recruiting labor competitive.

2. Higher search cost for workers in monopsony situation.

3. Labor movement cost and job information cost in such market is very high.

However, if workers would be able to search job in easier manner or can relocate elsewhere to find jobs then power of monopsony can be reduced.

Thus,

The correct answer is the option (c) [An increased ability of workers to relocate elsewhere].

Rahul Sunny answered 2 years ago

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