Question

What is collective bargaining, and why is it valuable to employees? What is the difference between a monopoly and a monopsony? Give an example of each.

Answer 1

Bargaining is a process of negotiation so collective bargaining is a process in which there is a negotiation between the management and the union of workers. The negotiation can take place over various issues including the working conditions the wage rate offered, health insurance provided, fringe benefits, etc. It is very valuable to employees because when they have a collective bargaining power, they can raise issues that are important to them and can convince/threat the management need to agree with their conditions or to face a strike.

Monopoly is a market in which there is a single seller and monopsony is a market in which there is a single buyer. Local electricity providers are monopolist because they do not face any competition from other private supply of electricity. Similarly factories in local regions or towns are monopsonist because generally there is only one single factory employing all the people in the region.