Key terms
- Monopsony
- A monopsony is a labour market in which there is only one employer, so workers who want that kind of job must accept its wage.
- Monopoly
- A monopoly is a market with only one seller, which can charge any price it wishes and must lower it to sell more.
The only employer can set the wage and must raise it to hire more
Because a monopsony is the sole employer in its labour market, it can offer any wage it wishes. It still faces the market supply curve of labour, though, so if it wants to hire more workers it must raise the wage it pays.