Question

Suppose the downward sloping labor demand curve shifts rightward in a labor market with a single employer (monopsony). What happens to the equilibrium wage and level of employment in the market

Answer 1

Answer:

• Equilibrium wage increase
• Level of employment increase

Explanation:

A shift rightward in the labor market of a single employer would imply that the employer wants more labor. They will therefore increase the wages that they are paying their labor to entice more labor and the level of employment in the industry will increase as the employer hires more people.

Graphically speaking, when the labor demand curve shifts right, it will intersect with the labor supply curve at a higher equilibrium wage. The quantity of labor will also increase as it goes to a new equilibrium point.