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Monopoly of a buyer is often referred to as monopsony. It is a condition of the market that is equal to monopoly. The only point of difference is that it is the monopoly of the buyer where a buyer is a large firm. This large firm has the capacity of being the sole buyer of the market. And thus, has the demand control of the market and can also influence the cost of products of that market. Monopsony is an important factor. And more knowledge on this topic can be taken by visiting myhomeworkhelp.com monopsony power: marginal and average homework help.
Marginal and average factor cost
There lies a relation between marginal and average factor cost according to which any change of the average cost is influenced by the comparison of marginal and average factor cost. In a market where there is no control, the marginal cost is equivalent to average cost whereas, in a situation of monopsony, marginal cost is more than average cost and the average cost increases. An in-depth knowledge of the relationship between average and marginal cost can be derived easily from monopsony power: marginal and average assignment help. The standard relation can thus be summarised as follows –
- When marginal cost is lower than average cost, the average cost decreases.
- When marginal cost is more than average cost, the average cost increases.
- When the marginal cost and average cost are equal, the average cost stays constant.
Labour market: an example of monopsony
Labour market is a very good example of amonopsony. When there is a large factory in a particular area that has the capacity of employing most labours of that area, it leads to monopsony. The factory, in this case, has complete control of employing the number of labours needed and in addition determining their wages. Learning more about the labour market is very essential in the study of monopsony which can be done by visiting monopsony power: marginal and average homework help.
Effects of monopsony on labour markets
Monopsony can have several effects on labour markets; these are as follows –
- In monopsony, the labours do not have options to get employed, so they work in the firm that is the decision maker in the market which leads to lesser wages for the labours. This in turn creates inequality among people of the society.
- When a firm has monopsony, it has the highest power for selling. So, at times, these firms gain huge amounts of profits by exploiting the labours with less pay and consumers with high product price.
- The firms in monopsony often have so much power that they are not at all concerned about their workers as they are aware of the fact that the workers do not have any option. So the working environment for the workers is not even up to the mark. Real life examples of monopsony and their effects can be learnt by visiting monopsony power: marginal and average assignment help.
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