Question

Why does a monopsonist have the power to act as a price-maker in the factor market?

Options

• Sellers can easily find many other buyers

• The government fixes all prices

• The buyer is the only or main purchaser for that input

• The product is available in unlimited quantity

Answer 1

The buyer is the only or main purchaser for that input

Explanation: 

Since the monopsonist is the main or only buyer for a specialised input, sellers depend on it and must accept the price it offers.