Monopsony Flashcards

1
Q

What are the characteristics of a monopsony

A

the same basic characteristics as a monopoly but it is that there is a majority or only one single buyer in the market, this makes them a price maker.

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2
Q

What is the primary monopsony power example

A

Supermarkets forcing low prices from farmers

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3
Q

What is the other best example of a monopsonist power

A

NHS is a monopsonist buyer of pharmaceuticals which allows it to operate the free healthcare system but also invest more.

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4
Q

effects of a monopsony for a firm

A
  • Higher profits as they can buy raw materials at lower prices reducing cost
  • They achieve purchasing economies of scale
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5
Q

effects of a monopsony for consumers

A
  • If reduced costs are passed on consumers will benefit from lower prices
  • Can lead to a fall in supply as a firm being exploited by monopsonist powers will supply less and that may be passed onto consumers
  • If prices are driven down there may be a fall in quality
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6
Q

Effect of a monopsony for employees

A
  • Monopsony firms making higher profits may have to pay higher wages
  • If a firm is a monopsonist of the labour market then they will drive wage down
  • Suppliers will supply less so employ less
  • Monopsonies may employ more due to decreased costs but may employ less due to decreased supply
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7
Q

Effect of a monopsony for suppliers

A
  • Suppliers will lose out as they’re prices are driven down so they will make less profit or even a loss
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