Monopsony Demand Curve With A Price Floor

Because the monopsonist is the sole de mander of labor in the market the monopsonist s demand for labor is the market demand for labor.

Monopsony demand curve with a price floor. A monopsonist is a single buyer of labour such as de beers the diamond producer and the major employer of diamond workers in south africa monopsonists are common in some small towns where only one large firm provides the majority of employment. Minimum wage and monopsony. If farmers don t sell to the big supermarkets there are few alternatives. Unlike a firm operating in a perfectly competitive labor market the monopsonist does not simply hire all the workers that it wants at the equilibrium.

A monopsony employer faces a supply curve s a marginal factor cost curve mfc and a marginal revenue product curve mrp it maximizes profit by employing l m units of labor and paying a wage of 4 per hour. This has led to farmer protests about the price of milk. A modest price floor forces the monopsonist to take price as given and increase its purchases toward the level of competitive buyers. A monopsony employer faces a supply curve s a marginal factor cost curve mfc and a marginal revenue product curve mrp.

It maximizes profit by employing lm units of labor and paying a wage of 4 per hour. The imposition of a minimum wage of 5 per hour makes the dashed sections of the supply and mfc curves irrelevant. In principle inefficiency from monopsony can be mitigated by a well placed legal price floor which removes the monopsonist s power over price and eliminates its incentive to restrict the quantity it purchases. The imposition of a minimum wage of 5 per hour makes the dashed sections of the supply and mfc curves irrelevant.

Monopsony in product markets. In several industries there is one buyer and several sellers. The supply of labor that the monopsonist faces is the market supply of labor. Supermarkets have monopsony power in buying food from farmers.

The special case of the monopsonist is an important one. This curve relates the wage paid to.