Question

Distinguish between a Monopsony Market and a Monopoly Market.

Distinguish between a Monopsony Market and a Monopoly Market.

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Answer #1

Answer - Monopoly is the market with single seller. There are no close substitutes of the produce which monopolist produces. Entry and exit are banned in the monopoly market thus a monopolist has full control over market supply. The monopolist is price maker. The monopolist face downward sloping demand curve. There are many buyers in the market. The monopolist always tries to drive price up.

Monopsony is a market with single buyer. There are many sellers in the market. Monopsonist has full control over market demand thus monopsonists always try to drive price down. A firm act as sole purchaser of labor in the labor market and try to reduce wage rate. A monopsonist faces upward sloping supply curve with its corresponding marginal resource cost curve.   

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