Monopsonistic Markets
| English | Chinese | Pinyin |
|---|---|---|
| monopsony | 买方垄断 | mǎi fāng lǒng duàn |
| marginal factor cost | 边际要素成本 | biān jì yào sù chéng běn |
| supply curve | 供给曲线 | gōng jǐ qū xiàn |
| minimum wage | 最低工资 | zuì dī gōng zī |
The only employer in town
- One factory in a small town, and it is the only place hiring.
- Workers have nowhere else to go — so who holds the power now?
- This is the mirror image of a monopoly: a single buyer of labour.
- It is called a monopsony 买方垄断.
A monopsony is a factor market with:
It is the mirror image of a monopoly — one buyer instead of one seller.
Marginal factor cost above the wage
- Because the monopsonist is the whole market, to hire more it must raise the wage — and pay it to every worker, not just the last.
- So the marginal factor cost 边际要素成本 of one more worker is above the wage on the supply curve.
- This mirrors a monopolist, whose marginal revenue is below its price.
For a monopsony, the marginal factor cost of one more worker is above the wage on the supply curve.
To hire one more it must raise the wage for every worker, so MFC exceeds the wage.
Fewer workers, lower wage
- The monopsonist still hires where $MRP = MFC$, then reads the wage off the supply curve 供给曲线 at that quantity.
- The result: it hires fewer workers than a competitive market, and pays a lower wage.
- That is why a monopsony is inefficient — workers are paid less than the value they add.
Competitive vs monopsony
A monopsony's marginal factor cost lies above the supply wage, so it hires fewer workers at a lower wage than a competitive market would.
Compared with a competitive factor market, a monopsony:
It hires where MRP = MFC but pays the lower wage off supply — fewer workers, lower pay.
A monopsonist chooses its quantity where MRP equals ______, then reads the wage off supply.
MRP = MFC gives the quantity; the wage comes from the supply curve, which is lower.
Match each market to what it pays workers.
Competition pays the MRP; a monopsony pays less, which is why it is inefficient.
The minimum-wage twist
- In a competitive market, a minimum wage 最低工资 above equilibrium causes unemployment.
- But in a monopsony, a well-set minimum wage removes the employer's power to push the wage down.
- So it can raise both the wage and the number employed at the same time — a surprising result.
In a monopsony, a well-set minimum wage can:
It removes the employer's power to hold the wage down, so wage and employment can both rise.
A monopsony is a single buyer of labour, so its marginal factor cost lies above the supply-curve wage. It hires where $MRP = MFC$ but pays the lower wage off supply — fewer workers, lower wage. A well-set minimum wage can raise both wage and employment.