Full text: Price Takers' Plenty in a Model of Pure Capitalism.

evident and 
be acted upon. 
Strong unions and a highly competitive labor market reduce the 
individual employer's position in the labor market to that of a 
price taker and quantity adjuster, whose profits, in the long 
run, are maximized when he employs the amount of labor that 
equates its MVP to the wage. In the short run, however, the 
employer is able, through appropriate quantity adjustments, 
to influence the wage he pays his workers. That makes him a 
temporary monopsonist, who, finding that the MVP of his workers 
exceeds their MC, can earn a temporary monopsony profit by 
employing additional workers. 
Note that that situation is the exact opposite of the price- 
maker employer's situation, who acts as a. monopsonist in setting 
his wage but -feggil^iooks upon the wage he set as fixed) in the 
short runjand proceeds to make all his other adjustments and 
decisions as if he were a perfect competitor and faced a wage 
given from the outside. What remains to be shown is that those 
two employers, despite their diametrically opposite market 
positions, behave in very similar, almost identical ways. 
The paradox is due to the peculiar, upside-down situation that 
the payment of revenue-sharing bonuses to workers created for 
their employer. His short-run monopsony power derives fi*on the 
fact that the price of his labor is a function of the amount of 
employment he offers; but it is a declining function of employment
	        

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