Which of the following is true of a monopsony in a labor market?

• A. A monopsony pays the same wage to all workers regardless of the quantity hired.
• B. A monopsony faces a perfectly elastic supply of labor.
• C. A monopsony cannot affect the equilibrium wage in the labor market.
• D. A monopsony is a single buyer of labor and can influence the wage rate paid to workers.

Answer: (D)

Verified step by step guidance

1. Understand the definition of a monopsony: it is a market situation where there is only one buyer—in this case, a single employer in the labor market.
2. Recognize that because the monopsony is the sole buyer of labor, it has market power to influence the wage rate rather than taking it as given.
3. Recall that a monopsony faces an upward-sloping labor supply curve, meaning it must pay higher wages to attract additional workers.
4. Note that unlike a perfectly competitive labor market, a monopsony does not pay the same wage to all workers; instead, the wage depends on the quantity of labor hired.
5. Conclude that the correct statement is that a monopsony can influence the wage rate paid to workers, distinguishing it from competitive labor markets where firms are wage takers.