A Level Economics AQA Practice Exam

Which characteristic is associated with a monopsony?

1. Multiple buyers and multiple sellers

2. Only one firm hiring workers

3. High mobility of workers

4. A competitive bidding for labor

The correct answer is: Only one firm hiring workers

The characteristic associated with a monopsony is indeed that there is only one firm hiring workers. In a monopsony, the single employer has significant control over the labor market, meaning it can set wages lower than it would in a competitive labor market because workers have fewer alternatives for employment. This concentration of market power allows the employer to dictate terms to a greater extent than is possible in a competitive environment with multiple employers. The other choices reflect characteristics of different market structures. Having multiple buyers and multiple sellers indicates a competitive market, which contrasts with a monopsony. High mobility of workers often pertains to labor market dynamics in competitive environments where workers can easily move from one job to another. Lastly, competitive bidding for labor typically occurs in multiple employer scenarios where numerous firms are vying for the same pool of employees, further highlighting the distinction from a monopsony situation.