Question

State main feature of monopsony.

Explain the important features of monopsony.

Explain one main feature of a monopsony market.

Mention any two features of monopsony.

Answer 1

1. Single Buyer: A monopsony is a market situation where there is only one buyer of a particular good, service, or input. This buyer is the only entity that purchases the entire supply of that product or service.
2. Many Sellers: Although there is only one buyer, there are numerous sellers or suppliers. For instance, in a monopsony labour market, a single employer may hire a large pool of workers.
3. Specialised Product or Input: Monopsony often exists when the buyer purchases a specialised product or input that is not useful to other buyers. For example, a particular car part made specifically for Maruti cars cannot be used by other car brands like Hyundai or Honda.
4. Lack of Mobility: Monopsony thrives in markets where workers or sellers cannot easily move to other jobs or locations. If workers are geographically or occupationally mobile, they may leave for better-paying jobs, breaking the monopsony. However, emotional or personal ties to a location may reduce mobility and allow the monopsony to continue.
5. Price-Maker: Just as a monopolist can set prices for goods it sells, a monopsonist can influence the price at which it buys goods or services. Being the only buyer, it can decide how much to pay, and sellers must accept that price if they want to sell.