Monopsony

Question 1

Define a monopsony and give 2 examples

Answer 1

A monopsony is a single buyer in the market

Examples: The Network Rail for track and maintenance

Government for teachers

Question 2

Name the characteristics of a monopsony

Answer 2

• profit maximisers
• firms with monopsony power is able to negotiate low prices because their suppliers have no where else to sell (they are the only buyer in the market)
• they can set the market price

Question 3

What is the costs and benefits to firms, suppliers, consumers and employees?

Answer 3

Costs to suppliers

It is the monopsony power of supermarkets that has led to farmers losing their profits

Farmers lose out to supermarket price wars as monopolists able to negotiate lower prices, in order to lower their own prices and compete with other supermarkets