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What is the implication of having relatively immobile workers in a monopsony?

  1. There is a flexible labor market

  2. Wages will fluctuate frequently

  3. It limits the options for workers seeking employment

  4. It increases competition among firms

The correct answer is: It limits the options for workers seeking employment

In a monopsony, which refers to a market situation where there is only one buyer for a particular type of labor, the relative immobility of workers has significant implications. The correct choice emphasizes that immobile workers have limited options when it comes to seeking employment. This immobility can arise due to various barriers, such as geographical constraints, lack of necessary skills, or specific industry circumstances that prevent workers from easily moving to where jobs are available. As a result, workers may have little choice but to accept the terms and conditions set by the monopsonistic employer, including wages and working conditions. This dynamic can lead to lower wages and poorer conditions since the workers cannot easily seek better opportunities elsewhere. The power imbalance inherent in a monopsony is exacerbated by the immobility of workers, as it diminishes their bargaining power and reduces competition for their labor. In contrast, a flexible labor market would imply that workers can easily move between jobs, which is not the case here. Frequent wage fluctuations would also suggest a dynamic environment where employers are competing for workers, which does not align with the characteristics of a monopsony. Lastly, increased competition among firms is opposite to the definition of a monopsony, as it describes a market with a single dominant