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Employment (quantity)

Employment (quantity)

hire additional employees. This is analogous to cutting prices for all customers in order to expand sales, causing the MR curve to lie below the demand curve. Because workers need to be paid only the wage rate indicated along the labor supply curve for a given level of employment, the monopsonist employer offers employees a wage of WM and a less than competitive level of employment opportunities, EM.

An unchecked union, or monopoly seller of labor, could command a wage of WU if demand for labor were competitive. This solution is found by setting the marginal revenue of labor (MRL) equal to the labor supply curve, which represents the marginal cost of labor to the union. Like any monopoly seller, the union can obtain higher wages (prices) only by restricting employment opportunities (output) for union members. A union is able to offer its members only the less than competitive employment opportunities, EU, if it attempts to maximize labor income.

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