14.2 Wages and Employment in an Imperfectly Competitive Labor Market

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Define monopsony power

• Explain how imperfectly competitive labor markets determine wages and employment, where employers

have market power

In the chapters on market structure, we observed that while economists use the theory of perfect competition

as an ideal case of market structure, there are very few examples of perfectly competitive industries in the real

world. What about labor markets? How many labor markets are perfectly competitive? There are probably

more examples of perfectly competitive labor markets than perfectly competitive product markets, but that

doesn’t mean that all labor markets are competitive.

When a job applicant is bargaining with an employer for a position, the applicant is often at a

disadvantage—needing the job more than the employer needs that particular applicant. John Bates Clark
{"uploaded_via": "batch_uploader", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "batch_upload": true, "moddate": "2022-12-07T14:23:05-06:00", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)"}