“When there is a single firm hiring the labor in the market, it is called monopsony in economics“.
Under perfect competition, the labor gets wages equal to its marginal revenue product. There is no exploitation of labor. However, when the market of labor is imperfect, there emerges the phenomenon of exploitation of labor.
How the wages are determined under imperfect competition and their exploitation by the monopnist firm is explained in brief as under.
Characteristics or Features:
Monopsony in the labor market, is said to exist when there is a single buyer of labor. The main characteristics of monopsony are as under:
(i) The firm or employer hires a large portion of the total employment of a certain type of labor.
(ii) The mobility of labor is very much limited either geographically or in terms of skills of offer.
(iii) The monopsonist faces imperfect competition in the labor market but perfect competition in the product market.
(iv) The single buyer faces a large number of workers who are unorganized or non-unionized.