Union Wages in a Monopsonistic Market
In a monopsonistic labor market, what is the likely effect on the firm’s employment level if a newly formed union negotiates a wage higher than the current wage?
A
Employment increases as higher wages boost worker morale and productivity, offsetting the cost increase.
B
Employment increases because the higher wages force the firm to hire more workers in order to justify the increased expenditure on labor.
C
Employment remains unchanged because monopsonistic employers adjust their hiring to maintain equilibrium.
D
Employment decreases because the higher wages increase the marginal factor cost more than proportionally, leading the firm to cut back on hiring.
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