4.1.6.4 Imperfect labour markets NOTES

What does monopsony power in a labour market imply?

• Multiple employers compete fiercely, increasing wages.

• Workers have significant bargaining power.

• A single employer dominates the market, controlling wages and employment conditions.

• All employers offer the same wage rates.

How do trade unions affect the labour market?

• They represent workers to negotiate for better wages and conditions.

• They reduce the number of available jobs.

• They decrease wages by collective bargaining.

• They ensure perfect competition in the labour market.

What is a consequence of imperfect information in the labour market?

• It can cause mismatches between labour supply and demand.

• It ensures all workers are aware of job opportunities.

• It leads to optimal hiring decisions.

• It guarantees equal wages for all workers.

In a monopsony labour market, how does the employer use their market power regarding wages?

• They increase wages above competitive levels.

• They set wages according to worker demands.

• They set wages below the level that would prevail in a competitive market.

• They allow workers to set their own wages.

What impact does monopsony power have on employment levels?

• It ensures full employment.

• It increases employment levels above competitive market levels.

• It has no impact on employment levels.

• It limits the quantity of labour hired, reducing employment levels.

What role do trade unions play in negotiating employment conditions?

• They negotiate with employers on behalf of workers to improve conditions.

• They only focus on increasing worker benefits.

• They negotiate on behalf of employers.

• They prevent any negotiations with employers.

How does imperfect information affect employers in the labour market?

• It decreases the mismatch between labour supply and demand.

• It leads to employers making suboptimal hiring decisions.

• It ensures that all employers make perfect hiring decisions.

• Employers have complete information about potential employees.

What is the effect of collective bargaining by trade unions?

• It creates flexible wage structures.

• It leads to lower wages for union members.

• It can lead to higher wages for union members but may hinder flexibility for employers.

• It ensures that all workers receive minimum wage.

How does a monopsony in the labor market affect the efficiency of resource allocation?

• It improves efficiency by optimizing resource allocation.

• It reduces efficiency by distorting the allocation of labor.

• It has no significant effect on resource allocation.

• It increases competition among workers, enhancing efficiency.

What is the likely impact of trade unions on job security for their members?

• They decrease job security by demanding unreasonable wages.

• They increase job security through collective bargaining.

• They have no impact on job security.

• They only focus on wages, not on job security.