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AP® Microeconomics · Unit 5 · Topic 5.4

Monopsonistic Markets: Topic Checklist (Microeconomics 5.4)

Specific “I can…” statements for monopsonistic labour markets, each linked to the guide section and practice question that shows whether you can really do it.

Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.

Understanding

  • I can describe a monopsonistic labour market and explain why the firm is a wage setter facing the upward-sloping market supply of labour. (Guide: “What a monopsony is”)
  • I can explain why hiring one more worker costs more than that worker’s wage, so MRC is above the wage. (Guide: “Why MRC is above the wage”; Practice Q1, Q6(d))
  • I can tell a monopsony (one buyer) from a monopoly (one seller). (Guide: Common misconceptions)
  • I can state the hiring rule MRC = MRP and explain why the wage comes from the supply curve, not from the MRC = MRP point. (Guide: “The hiring rule”; Practice Q4)

Calculation and graphing

  • I can calculate total labour cost and MRC from a supply schedule, and check MRC as the new wage plus the raises for existing workers. (Guide: Worked example 1; Practice Q3, Q5)
  • I can find the monopsony’s employment and wage from a table. (Guide: Worked example 1; Practice Q5)
  • I can write the MRC equation for a straight-line supply curve and solve for the monopsony and competitive outcomes. (Guide: Worked example 2; Practice Q7)
  • I can draw a correctly labelled monopsony graph with S, MRC, MRP, Lm, Wm, Lc and Wc, and shade the deadweight loss. (Guide: Figure 1; Practice Q6)
  • I can calculate the deadweight loss of a monopsony from straight-line curves. (Guide: Worked example 2(d); Practice Q7)

Reasoning

  • I can compare a monopsony with a perfectly competitive labour market: employment, wage, MRC and the gap between wage and MRP. (Guide: comparison table; Practice Q2, Q5(d))
  • I can explain why a monopsony does not hire workers whose MRP is above the wage they would accept. (Guide: Worked example 1(d); Practice Q5(c))
  • I can explain why the monopsony outcome is inefficient. (Guide: “Monopsony compared with a competitive labour market”)

All ticked? Move on to Topic 6.1, Socially Efficient and Inefficient Market Outcomes, or return to the course roadmap.

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