Question

4) Explain why the following statements are either true or false:

A: In a competitive labor market, a minimum wage above the market equilibrium will reduce the level of employment.
       

B: In a monopsony labor market, a minimum wage set above equilibrium will always reduce the level of employment.
      

   C: In bilateral monopoly labor markets the monopsony employer and the union bargain to an outcome that is closer to a competitive equilibrium.
        

D: If two industries have identical labor supplies and operate in competitive labor markets then there is no reason for them to have different wage levels. 


Answer 1

4.) A) The In a labor The Answer js True iie competitive market, aminimum wage above the market equilibrium will reduce the level of employment. Ina perfectly competitive labor market market, where the wage rate is determined in the industry irather than by the individual from, each firmis wage taker. This that the actual equilibrium wage will be set in the market 4 the supply of labotar to the elastic at the market rate. individual from so perfectly elastic at - means Tho or By The Answer False len In a monopsony market however minimum wage above the equilibrium wage could increar employment at the same time it boosts wages. A monopjony Ocwrs when there is a role a dominant employu in a labour market mean that the employer has buying power over their potential employees. This gire them wage setting power in the Produity labour morter. Answer is False j.e. In bilateral monopoly labour market ita sure that the outcome will be lower employment compared to compelline labou compared to competitive labour mooket. Waze is based on the monopsonit selatin bargaining power compared to union. A bilateral monopoly I a labour market with anion side of a monopjony on the demand side. since both rides hom monopoly power the equilibrium level of employment usill be lower than competitie labour market. The union foron a high wage, while monopony favou low wage, ow- come D indelvominate in the model'. CY on supply - but the

2 Dy The Answer is. False lee. Everyone brings unique brings unique skill of abilities to a job. And no two jobs are exactly alike, variations offect pay for jobs within the same occupation . often more pronounced these vomications the bigger the wage difference. the ore - .