Monopsony
Monopsony is a market structure where a single buyer (or very few buyers) purchases a large proportion of industry output, giving the buyer power to influence prices and terms. It is the buying-side equivalent of monopoly.
Real World
UK supermarkets — particularly Tesco in its peak growth phase — exercised monopsony power over dairy farmers, forcing milk prices below production costs; in 2012 Tesco, Asda, and Morrisons were fined £49.5 million by the OFT for coordinating milk price-fixing with processors.
Exam Focus
Draw the monopsony diagram showing the MFC curve above supply — examiners frequently award marks specifically for correctly labelling the monopsonist's wage/price below the competitive equilibrium.
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