cost of additional labor is greater than the wage. To maximize profits, a monopsonist will hire workers up to the

point where the marginal cost of labor equals their labor demand. This results in a lower level of employment

than a competitive labor market would provide, but also a lower equilibrium wage.

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

A labor union is an organization of workers that negotiates as a group with employers over compensation and

work conditions. Union workers in the United States are paid more on average than other workers with

comparable education and experience. Thus, either union workers must be more productive to match this

higher pay or the higher pay will lead employers to find ways of hiring fewer union workers than they

otherwise would. American union membership has been falling for decades. Some possible reasons include
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