Monopsony

• What is a monopsony?

  A single buyer of labour or a product
• How do monopsony firms influence prices?

  They can dictate prices compared to competitive markets
• Are pure monopsonies common?

  No, they are rare
• Why is monopsony power significant in certain sectors?

  Because suppliers often have limited alternatives
• How many references to monopsony were there in the Financial Times from 2003 to 2009?

  Six references
• How do supermarkets reduce costs?

  By forcing down prices paid to suppliers
• What is a consequence of strict criteria for acceptable produce?

  It leads to wasted resources and increased costs
• How does globalization affect smaller suppliers?

  It makes it difficult for them to compete
• What are the advantages of monopsony power in markets?

  • Improved value for money for consumers
  • Increased producer surplus for firms
  • Acts as a counter-weight to monopolists
  • Fair Trade initiatives improve contracts for farmers
  • Job security for civil servants
• How does the NHS benefit from monopsony power?

  It drives down prices of routine drugs
• What is the impact of lower input costs for firms?

  It raises profitability for capital investment
• How does monopsony power affect farmers in developing countries?

  It can lead to better contracts and prices
• What is a potential downside for suppliers under monopsony?

  They may receive lower prices and revenue
• What happens if a supplier's price is set below AVC?

  They may have to shut down operations
• Why do suppliers feel intimidated by monopsonies?

  They rely heavily on the monopsony for revenue
• What is the effect of strict cosmetic standards on suppliers?

  It leads to wasted produce and lost revenue
• How do monopsony firms benefit from lower production costs?

  They can achieve supernormal profits
• What is the relationship between monopsony and allocative efficiency?

  Monopsonies can provide goods at equilibrium price
• How do large employers affect wage rates in a monopsony?

  They can determine wage rates and conditions
• What is a potential benefit for employees in a monopsony?

  High job security due to profits
• What happens to employees of suppliers under monopsony pressure?

  They may lose jobs if prices fall below AVC
• What are the characteristics of a monopsony?

  Single buyer, price-setting power
• What conditions allow a monopsony to operate?

  Limited alternatives for suppliers and buyers
• What are the costs and benefits of monopsony for different stakeholders?

  Costs:

  • Lower prices for suppliers
  • Pressure on suppliers to meet standards
  • Potential job losses for supplier employees

  
  

  Benefits:

  • Lower prices for consumers
  • Higher quality goods
  • Job security for employees of monopsonies
• In which sectors is monopsony power significant?

  Supermarkets and labour markets