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.
2
Q
What is the primary monopsony power example
A
Supermarkets forcing low prices from farmers
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.
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
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
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
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