3.4 Market Structures Flashcards
1
Q
What is a monopsony?
A
A market condition that is dominated by one buyer
2
Q
What is an absolute/pure monopsony?
A
A market condition when there is a single buyer in a market
3
Q
What is the difference between marginal cost (MC) and average cost (AC)?
A
- Marginal cost: the change in total labour costs from employing one extra worker
- Average cost: The average cost of labour per unit produced
4
Q
How do monopsonies profit maximise?
A
Firms can afford to pay MRP (where the cost of hiring is equal to revenue earned). However, they abuse their power as sole buyer to maximise profit and pay less than the MRP
5
Q
What are 2 drawbacks of monopsonies?
A
- Limit worker choice
- Lower wages create exploitation
