CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market
In a small town, a single cement factory is the only employer of unskilled labour, and workers have no other local job options. This labour market is best described as:
This is a monopsony, because there is a single buyer of labour, the cement factory, facing many workers with no alternative employers. The buyer therefore has power to influence the wage. Monopoly means a single seller, so it does not fit.
- AMonopsonyCorrect
- BMonopoly
- CDuopoly
- DBilateral monopoly
Explanation
One buyer of labour facing many sellers of labour is a monopsony. The factory can influence the wage it pays. Monopoly refers to a single seller of a product, so it is wrong here. Bilateral monopoly would need a single seller as well, such as one union representing all workers, which is not stated.
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