3.4.6 - Monopsony Flashcards
When Does A Monopsony Occur?
When there is a dominant buyer in the market.
What Are Examples Of Monopsony’s?
(4 Points)
~ NHS.
~ Teachers.
~ Supermarkets.
~ Government.
What Is A Monopsonist?
A firms which has monopsony power.
How Can We Measure Monopsony Power?
Comparing wages to MRP.
What Are Benefits To Firms Of Monopsony Power?
Reduced costs of production means higher profits.
What Are Drawbacks To Firms Of Monopsony Power?
(3 Points)
~ Reputational damage for the way they treat their workers.
~ Conflict with suppliers due to continual price pressure.
~ In the long-run they may drive their suppliers out of business causing supply chain issues.
What Are Benefits To Employees Of Monopsony Power?
Higher profits = higher wages for the monopsonist employees.
What Are Drawbacks To Employees Of Monopsony Power?
Employees may find it hard to cope with the harsh treatments of the suppliers.
What Are Benefits To Consumers Of Monopsony Power?
Lower average costs for the firm which may result in lower prices for consumers.
What Are Drawbacks To Consumers Of Monopsony Power?
Poor quality products.
What Are Benefits To Suppliers Of Monopsony Power?
(2 Points)
~ Supplying to a well-known monopoly may enhance the suppliers reputation and increase sales volume.
~ Opens new opportunities.
What Are Drawbacks To Suppliers Of Monopsony Power?
Suppliers may be driven out of the business.
What Are The Characteristics Of Monopsonist’s?
(3 Points)
~ Wage makers.
~ Maximise the revenue from workers by hiring up to when MRP = MCL.
~ They decrease employment and wages.
What Is The Efficient Employment Decision?
MRP = MCL
On A Monopsony Graph, What Is The Supply Of Labour Equal To?
ACL = Wage.
Why Is The MCL Curve 2x As Steep As The ACL = Wage Curve.
Because we need to pay exiting workers the new wage that we offer to new workers.
What Is Marginal Cost Of Labour (MCL)?
Extra cost of the next worker.
Describe The Steps Into Order To Prove Why S = ACL
(4 Points)
~ W = A + BQ
~ ACL = TCL /Q Of Workers
~ TCL = Wage x Q Of Workers / Quantity
~ W
What Do Trade Unions Do?
Bargain for higher wages.
Assuming Trade Unions Are Strong What Do they Do?
(4 Points)
~ Control the supply of labour at given wage rates.
~ Make monopsonist wage takers.
~ Increase wages.
~ Increase employment.
What Is Collective Bargaining?
The process by which workers through their trade unions, negotiate contracts with their employers.
What Is Union Density?
The % of workers from an industry that is part of a trade union.
