Monopsony

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    A monopsony is the only buyer in the market.

    Conditions for a monopsony: – The monopsony must have market power. – Sellers must not be able to sell their goods to buyers outside of their market.

    A monopsony will force its suppliers to charge the monopsony a low price. If suppliers do not accept the low price they cannot sell their goods because the monopsony is the only buyer. However, Suppliers cannot profitably supply a lot at a low price so the monopsony buys a lower quantity of its suppliers’ output.

    Benefits/costs or likely effects of a monopsony include:

     

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