Monopsony and the Minimum Wage
What is a potential effect of an effective minimum wage in a monopsonistic labor market?
A
Minimum wage laws do not affect monopsony-controlled markets because there is only one buyer of labor regardless of wage rate changes.
B
It always results in excess supply of labor since minimum wage laws force firms to offer higher wages than market-clearing rates even under monopsony conditions.
C
It leads to reduced employment as firms cannot afford hiring at higher wages than they were paying originally.
D
It can potentially lead to an increase in employment if set below monopsonist’s marginal cost of labor curve but above current wage rate.
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