Question

What is a monopsony?

Short answer

Monopsony is when all prospective recruiting is done by a single enterprise in a given area (island, territory, etc.).

Step-by-step solution

Definition

Monopsony:

It's a company that's the only one buying resources or goods. Many businesses have monopsony power, which means they have some influence over their supply chains.

Explanation

A monopsony could be a market during which only 1 buyer exists. The market is named an oligopsony when there are just some buyers. Monopsony power may be a term accustomed describe when buyers have some control over the value of their inputs.

Some of the benefits are,

1. Buying power allows the company to gain more money because suppliers cannot overcharge.

2. Lower purchasing costs may be passed on to consumers in the form of lower retail prices.

3. Monopsony profits can be used to invest and innovate.

4. In the face of a monopoly supply of resources, monopsony power can empower purchasers. For example, cosmetics companies like L'Oreal can demand exorbitant prices for their products, but monopsonistic supermarkets can drive them to decrease costs.

Conclusion

Therefore, a monopsony, like a monopoly, operates in an imperfect market. A single consumer dominates a monopolised market, whereas a single provider dominates a monopolised market.