Monopsony

Question 1

What are the characteristics of a monopsony

Answer 1

the same basic characteristics as a monopoly but it is that there is a majority or only one single buyer in the market, this makes them a price maker.

Question 2

What is the primary monopsony power example

Answer 2

Supermarkets forcing low prices from farmers

Question 3

What is the other best example of a monopsonist power

Answer 3

NHS is a monopsonist buyer of pharmaceuticals which allows it to operate the free healthcare system but also invest more.

Question 4

effects of a monopsony for a firm

Answer 4

• Higher profits as they can buy raw materials at lower prices reducing cost
• They achieve purchasing economies of scale

Question 5

effects of a monopsony for consumers

Answer 5

• If reduced costs are passed on consumers will benefit from lower prices
• Can lead to a fall in supply as a firm being exploited by monopsonist powers will supply less and that may be passed onto consumers
• If prices are driven down there may be a fall in quality

Question 6

Effect of a monopsony for employees

Answer 6

• Monopsony firms making higher profits may have to pay higher wages
• If a firm is a monopsonist of the labour market then they will drive wage down
• Suppliers will supply less so employ less
• Monopsonies may employ more due to decreased costs but may employ less due to decreased supply

Question 7

Effect of a monopsony for suppliers

Answer 7

• Suppliers will lose out as they’re prices are driven down so they will make less profit or even a loss