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Monopsony definitions

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  • Monopsony
    A market structure with a single buyer, often resulting in lower wages and employment compared to competitive markets.
  • Labor Market
    A setting where firms hire workers and wages are determined by the interaction of labor supply and demand.
  • Marginal Cost of Labor
    The additional expense incurred by hiring one more worker, including wage increases for all current employees.
  • Marginal Revenue Product
    The extra output value generated by employing one more worker, guiding firms' hiring decisions.
  • Supply Curve of Labor
    A graphical representation showing the relationship between wage levels and the quantity of labor supplied.
  • Demand Curve for Labor
    A graphical line reflecting how many workers firms want to hire at various wage rates, based on productivity.
  • Equilibrium Wage
    The pay rate where labor supply equals labor demand, typically higher in competitive markets than in monopsonies.
  • Equilibrium Quantity
    The number of workers employed where labor supply and demand intersect, often reduced in monopsony situations.
  • Minimum Wage
    A legally set wage floor that can raise both pay and employment in markets dominated by a single employer.
  • Wage Floor
    A government-imposed lower limit on wages, preventing employers from paying below a certain amount.
  • Profit Maximization
    The process by which firms determine the optimal number of workers to hire by equating marginal cost and marginal revenue product.
  • Derived Demand
    The need for labor that arises from the demand for the goods and services produced by workers.
  • Market Power
    The ability of a firm to influence wages and employment levels due to its dominant position as the sole buyer.
  • Competitive Market
    A market with many buyers and sellers, leading to wage and employment levels set by supply and demand without single-firm influence.