Question

Berry just graduated from college and moved back to his hometown in Ohio. He is offered a job at the large food manufacturer which is the main employer of the town. They offer him a wage that is much lower than he had hoped. Since the food manufacturer is a monopsony in his town, when Berry writes a counter wage offer, what will most likely happen

Answer 1

As the food manufacturer is a monopsony in his town, when Berry writes a counter wage offer, "the firm will reject Berry's counter salary number and hire someone else".

What is meant by monopsony?

Monopsony is a market strategy where there is just one buyer, according to economic theory. A company that is the only employer in a small town is an example of pure monopsony. A business in this situation is able to provide lower wages than it otherwise might.

The characteristics of monopsony are-

• One company consuming all output in a market,
• No other customers, and
• Barriers to entry.

The monopsony work with the principle of-

• When a company enjoys market dominance when using factors of production, it is said to be in a monopsony (e.g. labour).
• There is only one buyer and many sellers in a monopsony. It frequently refers to an employer with market dominance over employee recruiting, or a monopsony.
• The idea behind monopsony, where there is only one vendor and numerous purchasers, is comparable to this.

To know more about market dominance and marketing strategy, here

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