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Monopsonistic Gender Discrimination

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With reference to the diagram that I have attached I would like to be able to explain the concept of monopsonistic discrimination. In addition, I would like to be able to explain (a) why the supply curves in this diagram for men and women differ? (b) be able to explain why women are paid less under the circumstances represented by this diagram and why both men and women are being exploited.

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Monopsony occurs when there is one buyer in a market, as opposed to the more familiar situation of monopoly where there is only one seller. When there is only one buyer, the sellers (in this case workers) cannot try to increase their prices (in this case wages). In this graph the employer's demand for labor is his marginal revenue product (MRP) curve. It tells us how much additional revenue each employee is worth to the employer. In addition we see curves for the supply of men (Sm), the supply of women (Sf) and the marginal costs of each group. The marginal cost curves tell us the ...

Solution Summary

How employers can maximize profits by practicing price discrimination between groups of workers.