3.4.6 Monoponsy Power

Question 1

What is a pure monopoly?

Answer 1

• when a firm is the sole buyer of resources or supplies
• many firms have some degree of monopsony power = firms have some control over their suppliers

Question 2

Characteristics of monopsony to operate

Answer 2

• single buyer
• limited substitute buyers
• price makers
• barriers to entry

Question 3

What are the costs of a monopsony?

Answer 3

• if the monopsony exploit power = can hard suppliers = reduced supply, lower product quality
• limited product variety for consumers
• use it powers to depress wages for employees

Question 4

Benefits of monopsony powers

Answer 4

• firms can make more profits
• consumers benefit from low prices
• can offer competitive wages and work in conditions
• suppliers can benefit from the stability and reliability of monopsony