APFIVE Monopsony Minimum Wage Effects
In a monopsony labor market where there is only one buyer of labor, what effect does an imposition of a minimum wage above the current equilibrium wage have on employment?
A
Employment will definitely decrease because employers will hire less due to increased costs.
B
Employment will definitely increase because workers are paid more.
C
Employment may either increase or remain unchanged depending on how far above equilibrium wage rate the minimum wage is set.
D
Employment will stay constant because there’s only one employer making decisions about hiring.
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