Evaluating Monospony

Question 1

Firms benefits (2++)

Answer 1

Gains ​higher profits by being able to buy at lower prices = increases the funding for research and development and leads to more return for shareholders
Achieve ​purchasing economies of scale = lower costs and increase profits

Question 2

Suppliers negatives (2)

Answer 2

Suppliers will lose out as they will ​receive lower prices​
Less will be supplied leading to some firms leaving the market

Question 3

Employees positive + negative (2)

Answer 3

Supplier will sell less goods and so employ less people
Monopsonists may pay​ higher wages​ as they are making higher profits

Question 4

Consumers positives

Answer 4

Customers may gain from ​lower prices​ as reduced costs are passed on

Question 5

Consumer negatives (2)

Answer 5

Could lead to a fall in supply = the business buys fewer inputs
Fall in quality due to prices being driven down

Question 6

What does fall in supply depend on (2)

Answer 6

On the price elasticity of supply in the market of which the monopsonist is a buyer
If it is inelastic there will be little fall in supply