💸 Unit 1: Basic Economic Concepts
1.0Unit 1: Basic Economic Concepts
1.1Basic Economic Concepts: Scarcity
1.2Resource Allocation and Economic Systems
1.3Production Possibilities Curve (PPC)
📈 Unit 2: Supply and Demand
2.4Price Elasticity of Supply
2.6Market Equilibrium and Consumer and Producer Surplus
2.7Market Disequilibrium and Changes in Equilibrium
2.8The Effects of Government Intervention in Markets
⚙️ Unit 3: Production, Cost, and the Perfect Competition Model
3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market
📊 Unit 4: Imperfect Competition
4.1Introduction to Imperfectly Competitive Markets
💰 Unit 5: Factor Markets
5.2Changes in Factor Demand and Factor Supply
5.3Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
🏛 Unit 6: Market Failure and Role of Government
6.1Socially Efficient and Inefficient Market Outcomes
6.3Public and Private Goods
6.4The Effects of Government Intervention in Different Market Structures
November 15, 2020
The second type of factor (resource) market is called a monopsony. A monopsony is an imperfectly competitive factor market where only a single firm buys resources.
Characteristics of Monoposonies
Differences between a Perfectly Competitive Labor Market and a Monopsony
Graphing a Monoposony
In a monopsony, we determine the number of workers by finding where MRP = MRC and then going down to the horizontal axis. We determine wage by finding MRP = MRC and then going down to the supply curve and over to the vertical axis.
There is 1 large hospital in a city that hires nurses. There are no other hospitals nearby that nurses are willing or able to travel to. What is the labor cost for this firm based on the graph?
Since the large hospital is the only firm hiring nurses, we know that this is a monopsony. Monopsonistic firms hire the quantity where MRP = MRC, but only pay the wage level where the quantity intersects the labor supply curve. Therefore, we know that the equilibrium wage is $12 and the equilibrium quantity is 30. To find our total labor costs for nurses, we simply multiply the wage by the quantity ($12 x 30 = $360).
Graph for Large Hospital Hiring Only Nurses
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