3.4.6 - Monopsony

Question 1

What Is A Monopsony?
(3 Points)

Answer 1

~ When there is only one buyer within the market.

~ Exist in labour and product markets.

~ E.g. NHS.

Question 2

What Are Characteristics Of Monopsonies?
(4 Points)

Answer 2

~ Wage makers.

~ Are able to negotiate lower wages and prices.

~ They are profit maximisers.

~ They are cost minimisers.

Question 3

What Are The Benefits Of Monopsonies?
(4 Points)

Answer 3

~ Higher profits and reduced costs.

~ Higher wages and lower prices, so higher consumer surplus.

~ Increase suppliers reputation.

~ Higher profits means more investment, benefiting consumers and firms.

Question 4

What Are The Disadvantages Of Monopsonies?
(3 Points)

Answer 4

~ Minimisation of costs could lead to a fall in quality.

~ Lower prices means suppliers may be driven out of the markets.

~ Impact on suppliers, could lead to reputational damage.