4. Suppose the formerly competing firms in the previous question form an employers’ association that hires labor as a monopsonist would. Describe verbally the effect on wage rates and employment. Adjust the graph you drew for review question 1, showing the monopsonistic wage rate and employment level as W2 and Q2, respectively. Using this monopsony model, explain why hospital administrators sometimes complain about a “shortage” of nurses. How might such a shortage be corrected?

LO17.3