Monopsony z | What is meant by the term “monopsony power”? Why might a firm have monopsony power even if it is not the only buyer in the market?
What is meant by the term “monopsony power”? Why might
a firm have monopsony power even if it is not the only buyer in the market?
monopsony power is a buyer's ability to affect the price of a good.
ReplyDeleteA buyer with monopsony power can purchase a good at a price below marginal value but it depends on the elasticity of supply facing the buyers. Buyers can purchase cheaper in competitive market.
Monopsony power refers to a buyer’s ability to affect the price of a good and to purchase the good for a lower price than in a competitive market. Any buyer facing an upward-sloping supply curve has some monopsony power. In a competitive market, the seller faces a perfectly elastic market demand curve and the buyer faces a perfectly elastic market supply curve. Thus, any characteristic of the market (e.g., a small number of buyers or buyers who engage in collusive behavior) that leads to a less-than-perfectly-elastic supply curve gives the buyer some monopsony power, even if it is not the only buyer in the market
ReplyDeleteGUIDELINE ANSWER:
ReplyDeleteMonopsony power refers to a buyer’s ability to affect the price of a good and to purchase the good for a lower price than in a competitive market. Any buyer facing an upward-sloping supply curve has some monopsony power. In a competitive market, the seller faces a perfectly elastic market demand curve and the buyer faces a perfectly elastic market supply curve.
Thus, any characteristic of the market (e.g., a small number of buyers or buyers who engage in collusive behavior) that leads to a less-than-perfectly-elastic supply curve gives the buyer some monopsony power, even if it is not the only buyer in the market.