Monopsony, Unions,

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Monopsony, Unions, Bilateral Monopoly Labor
Markets

• Imperfectly Competitive Labor Markets

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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

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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

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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)

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Union Demand Enhancement
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Exclusive Unionism
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Inclusive Unionism
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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

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Practicing Imperfectly Competitive Labor Markets

• Workbook Unit 4 Lesson 3 Activity 49
• Homework Chapter 26 2, 3, 7, 8, 9