Monopsony Flashcards
What is monopsony?
Where there is one buyer in the market and many sellers
What are the problems associated with monopsony?
Suppliers can be put out of business by low prices
Choice for consumers is limited
What are the benefits of monopsony to the monopsonist?
They gain higher profits by buying at lower prices which reduces their costs, and increase in output due to shift down of MC curve
What are the costs to suppliers of monopsony?
Prices paid for their good or service will fall
Decrease in price will cause a decrease in supply
What are the benefits/costs to customers in a monopsony market?
Customers will enjoy lower prices of goods supplied by the monopsonist
What can decrease monopsony power?
Mergers between suppliers (increases market share of supplier market, making it closer to bilateral monopoly for allocative efficiency)
