4.2.1 market failure Flashcards
1
Q
What is a monopsony?
A
A single buyer in a market, such as Network Rail for track maintenance.
2
Q
Why can a firm with monopsony power negotiate lower prices?
A
Because suppliers have nowhere else to sell to.
3
Q
What are the costs to monopsony power [3]
A
- Monopsony power of supermarkets has led to many farmers losing profits due to price wars
- Employees are likely to lose out with lower wages
- Workers might become unproductive if wages are low
4
Q
What are the benefits of monopsony power? [2]
A
- The NHS has monopsony power with pharmaceutical companies, meaning lower prices for drugs can be negotiated
- Consumers might receive lower prices
