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In a factor market scenario where there is only one buyer of a particular factor, it is called a monopsony market. Monopsony is a situation in buyer market that is equal to monopoly in the seller market. Like when there is only one seller of a particular product in a market, it is termed as monopoly. Similarly, one buyer in a market is termed as monopsony. Monopsony can occur in any market, but generally, it occurs in a market where a single company becomes the only buyer of a particular product. Monopsony is a very important topic, and more about it can be learnt by visiting factor markets with monopsony power homework help.
In a monopsony market, one buyer has the full control over the requirement of a particular product. Although any market dealing with services, goods, commodities or resources, etc. can work as a monopsony, but generally, the aspect is more predominant in markets where factor services are exchanged. More about examples of monopsony can be learnt by checking factor markets with monopsony power assignment help.
Factor markets with monopsony power in practical world
In the actual world, existence of pure monopsony is impossible. The closest form of monopsony is seen in labor markets where a huge factory situated in a particular area could employ almost all labors of that area. In monopsony, the buyer becomes the price determiner and thus controls the market completely. In this system, the distribution of resources is not proper, and the price and quantity of a factor required are lesser than normal which in turn is lesser than the standard for perfect competition. Visiting factor markets with monopsony power homework help can provide more examples of monopsony.
Features of monopsony market
- One buyer
Monopsony is a feature that arises when there is only one buyer for a particular production factor in a market. The presence of a single buyer gives rise to the condition of monopsony. In this situation, the full control over the demand for the particular factor or product is in the hands of the only buyer available in the market. Whichever seller wants to sell a product, they have to sell it to the monopsony buyer.
- No options available
In a monopsony, a status of single buyer is achieved, and the sellers of that market do not have any option of buyer to sell their products. This is the main reason why it is almost impossible for pure monopsony to exist in the practical world. Generally, in every market, there are some options available. More about deviations from monopsony can be learnt by visiting factor markets with monopsony power assignment help.
- Entry barriers
Due to the status of single buyer in a monopsony, entry of other buyers into the market is often restricted due to the following reasons –
- License from government or franchise
- Presence of copyrights
- Ownership of resources
- High cost of start-up
- Decrement in the average cost
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