Monopsony

Question 1

What is definition of monopsony?

Answer 1

A pure monopsony is the sole buyer of a product of a resource

Question 2

What are examples of monopsonies?

Answer 2

Government contracts , UK supermarkets, Employment of doctors

Question 3

What are conditions for a monopsony?

Answer 3

A market dominated by one firm or one that has a high concentration - ratio ( f rule), high barriers to entry, market suppliers or resources are competitive, collusion or cartel may exist, exploitation of suppliers and workers

Question 4

What are the benefits for consumers for monopsony?

Answer 4

Higher profits=> better quality profits due to investment in R&D. Cost savings could be passed onto consumers in the form of lower prices.

Question 5

What are the negatives of monopsony on consumers

Answer 5

Less consumer choice, due to marker power deterring new entries

Question 6

What are the benefits of monopsony for firms?

Answer 6

Low costs, dividends for shareholders, more competitive pricing

Question 7

Negatives of monopsony of firms

Answer 7

Run the risk of illegal competition, regulation from authorities

Question 8

Positives of monopsony on employees?

Answer 8

High employment , opportunities for workers

Question 9

Negatives of monopsonists for employees?

Answer 9

Firms able to drive wages down=> redistribution of income for shareholders

Question 10

Positives of monopsony on suppliers?

Answer 10

Benefit from economies of scale, improved cash-flow=> payments on time

Question 11

Negatives of monopsony on suppliers?

Answer 11

Monopsonists can bargain, reducing buying power=> potential bankruptcy. Monopsonists may switch to supplier who are undercutting prices