On the graph to the right we compare monopsony hiring with the situation which would prevail if the labor market were competitive. The monopsonist hires fewer workes and pays a lower wage. Our standard demand and suppy analysis led us to believe that hiring fewer workers would lead to high wages but monopsony hiring give low wages and low employment.
The presence of monopsonies may be the one irrefutable argument for the application of minimum wage laws.
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