F583 - Economics of Work and Leisure - June 2014

My dream paper tomorrow...

Section A

Case study on the cinema industry and oligopolies.


Section B

(a) Analyse, using a diagram, the behaviour of a monopsony. [15]

(b) Discuss the extent to which a monopsony is the main determinant of wages. [20]

What is monopsony? Is it the same as monopoly?


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Hello guys, could you please state what are the graph that we need to learn for tomorrow's exam? I could think of monopoly curve, linked demand curve, monopolistic curve, supply of labour in SR and LR, profit maximisation curve, is that all?


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Sort of, a monopsony is like a monopoly in a labour market - it is a sole employer of labour (Demand side of labour market), an example in the UK would be the NHS as the sole employer of nurses or TFL sole employer of tube drivers in London, as a result they are wage setters and are able to set wages below the market equilibrium wage rate.

I've had a go at doing all the diagrams I think we need here:

https://www.dropbox.com/s/y7mo7ftnjlkmtqd/F583%20diagrams%20for%20analysis.pptx

I may have made some mistakes though so best to check!

My dream paper tomorrow...

Section A

Case study on the cinema industry and oligopolies.


Section B

(a) Analyse, using a diagram, the behaviour of a monopsony. [15]

(b) Discuss the extent to which a monopsony is the main determinant of wages. [20]

I've had a go at doing all the diagrams I think we need here:

https://www.dropbox.com/s/y7mo7ftnjlkmtqd/F583%20diagrams%20for%20analysis.pptx

I may have made some mistakes though so best to check!

They look fine apart from the Monopolistic competition in the long run diagram.
I think the AC curve has to be tangential to the AR line, at the point where the firm would profit maximise, as this shows that normal profits are made in the Long run, as AR=AC.
What you have i think shows Subnormal profits, which could arise in the LR if the firm is forced to spend a lot on advertising and predatory pricing.
I'm not sure though

Cheers, that makes sense. I've updated it, is it right now?

does anyone have the mark scheme for the June 2013 paper?

can someone explain Monopsony and trade union on a graph pleaaaaase? like how it works, and which is more effective?

Monopsony is one main employer in the market - think the NHS for medical staff. They can use their bargaining power to reduce wages in the market, since they don't have much competition (and so staff have lower transfer earnings).

Trade unions are counteracting force to monopsony. It's a group of workers that all agree to do the same thing (like striking). They withhold their labour until they get a higher wage rate or better working conditions (think the proposed London Tube Worker Strikes recently). So they drive wages up, and can correct the underpayment by monopsony markets (and remove labour market failure) by moving the wages to equilibrium levels. However if they push the wage above equilibrium, they cause labour market failure.

Can't help you with the diagrams I'm afraid. But they're different, and do the opposite of one another - monopsony reduces wages, trade unions increase wages. Their effectiveness is hard to work out, I'll let someone better than me do that!

Monopsony is one main employer in the market - think the NHS for medical staff. They can use their bargaining power to reduce wages in the market, since they don't have much competition (and so staff have lower transfer earnings).

Trade unions are counteracting force to monopsony. It's a group of workers that all agree to do the same thing (like striking). They withhold their labour until they get a higher wage rate or better working conditions (think the proposed London Tube Worker Strikes recently). So they drive wages up, and can correct the underpayment by monopsony markets (and remove labour market failure) by moving the wages to equilibrium levels. However if they push the wage above equilibrium, they cause labour market failure.

Can't help you with the diagrams I'm afraid. But they're different, and do the opposite of one another - monopsony reduces wages, trade unions increase wages. Their effectiveness is hard to work out, I'll let someone better than me do that!

the diagram would be a bilateral monopoly diagram. effectiveness depends on relative bargaining power of the TU and the employer. an employers bargaining power is strong during a recession (lots of unemployment), when the labour is easy to substitute or replace with capital. TU's BP is strong during low unemployment, when not easy to sub labour, when D for final product is inelastic, when there is a high union density (i.e. if 100% of the workers are in the TU, the BP is much stronger than if 10% were)

Hey could someone explain how a shift to the right in the MRP curve due to increased productivity, will lead to an increase in the wage rate of a worker when the MCL remains perfectly elastic - i'm confused as in the june13 mark scheme it states that this can happen?

Hey could someone explain how a shift to the right in the MRP curve due to increased productivity, will lead to an increase in the wage rate of a worker when the MCL remains perfectly elastic - i'm confused as in the june13 mark scheme it states that this can happen?