Trade union in monopsony labour market

• In what type of labor markets does this video discuss the impact of trade unions?

  Monopsony-controlled labor markets
• According to the video, what is the primary challenge associated with the diagram illustrating trade union impact in monopsony markets?

  It is one of the most complicated diagrams
• In a basic monopsony labor market, how do the quantity of work and wages offered compare to competitive market outcomes?

  Both are way less than competitive levels
• What is the role of trade unions in labor markets?

  To bargain for higher wages
• What assumption is made about trade unions when they bargain for higher wages?

  They control the supply of labor
• According to the video, what is the trade union's goal when looking at a monopsonist offering low wages?

  Bargain for a higher wage
• What does the monopsonist become when a trade union bargains for a wage rate of $w_{tu}$?


  A wage taker up to a limit
• How is the limit to the number of workers willing to work at the new trade union wage rate ($w_{tu}$) determined?


  Where the wage rate intersects the supply curve
• Up to the limit on the supply curve, what does the supply curve become for the monopsonist when a trade union bargains for a higher wage?

  Horizontal
• Up to the limit, what curves does the horizontal line represent for the monopsonist?

  Supply, average cost, and marginal cost
• Beyond the limit, what happens to the supply curve if the monopsonist wants to employ more workers?

  Reverts back to the original supply curve
• According to the video, why does the marginal cost of labor revert back to its original curve beyond the black dot?

  Because wages must be increased for all workers
• What characteristic does the marginal cost of labor curve have in this model?

  A massive discontinuity
• After drawing the average cost and marginal cost curves, what condition does the monopsonist still adhere to?

  MRP equals the marginal cost of labor
• In the model discussed, what happens to wages and employment when trade unions intervene in a monopsony-controlled labor market?

  Both wages and employment increase
• According to the video, what effect do trade unions have in monopsony controlled labor markets?

  They improve efficiency
• According to the video, how can we measure monopsony power?

  Compare wages to MRP
• According to the video, the bigger the difference between the wage on offer and MRP, what happens when a trade union gets involved?

  The bigger the benefit
• What two factors increase with trade union involvement when there is a large difference between wage and MRP?

  Wage and quantity of workers
• What is the new supply curve equal to after the trade union bargains for higher wages?

  • Supply Trade union = Average cost of labor
  • Kinked Supply Curve
• What differences do you find beyond the black line in the diagram?

  • A kink in the supply curve
  • A vertical discontinuity in the marginal cost of labor curve