monopsony

Question 1

Monopsony def

Answer 1

Single buyer in a market
eg network rail for track maintenance
eg supermarkets buying produce from farmers

Question 2

Monopsony characteristics

Answer 2

Profit max
Has ability to lower prices
set the market price

Question 3

Monopsony Cons

Answer 3

Supermarkets force farmers to sell at lower prices so supermarkets can compete with others. farmers leave market as they cant sell at low prices. less choice, less comp, higher prices.
externalities of goods not being available.
Employees could have low wages and bad working conditions, as they have no other choice. HOWEVER trade unions have stopped this.
Employees could become demotivated id low wages.

Question 4

Monopsony Pros

Answer 4

Buyer can negotiate lower prices reducing opp cost and increasing dynamic efficiency to keep prices down in the long run.
Consumer receives low prices in the short run.

Question 5

Effects of monopsony on consumer

Answer 5

Higher consumer surplus
Lower choice if supplier shuts down

Question 6

Effect of monopsony on supplier

Answer 6

Low profits and revenues
Financial issues from missed or delayed payments
Reduction on product quality
Employment Falls

Question 7

Methods of reducing power

Answer 7

Give regulatory body higher powers
Minimum pricing
Block mergers as it leads to increased monopsony power