workers. Graphically, we can draw a vertical line up from Lm to the Supply Curve for the label and then read

the wage Wm off the vertical axis to the left.

How does this outcome compare to what would occur in a perfectly competitive market? A competitive market
would operate where DL = SL, hiring Lc workers and paying Wc wage. In other words, under monopsony
employers hire fewer workers and pay a lower wage. While pure monopsony may be rare, many employers

have some degree of market power in labor markets. The outcomes for those employers will be qualitatively

similar though not as extreme as monopsony.

FIGURE 14.10 Comparison of labor market outcomes: Monopsony vs. Perfect Competition A monopsony hires

fewer workers (Lm) than would be hired in a competitive labor market (Lc). In exploiting its market power, the

monopsony can also pay a lower wage (Wm) than workers would earn in a competitive labor market (Wc).

14.3 Market Power on the Supply Side of Labor Markets: Unions
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