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: