Micro Economics Assignment

PRINCIPLES OF MICRO ECONOMICS
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1.0 Introduction
According to Amos Web, a market characterized by a single buyer of a product. Monopsony is

the buying-side equivalent of a selling-side monopoly. Much as a monopoly is the only seller in a
market, monopsony is the only buyer. While monopsony could be analyzed for any type of
market it tends to be most relevant for factor markets in which a single firm is the only buyer of a
factor. Two related buying side market structures are oligopsony and monopsonistic competition.
Monopsony is a market in which a single buyer completely controls the demand for a good.
While the market for any type of good, service, resource, or commodity could in principle
function as monopsony, this form of market structure tends to be most pronounced for the
exchange of factor services.
While the real world does not contain monopsony in its absolute purest form, labor markets in
which a single large factory is the dominate employer in a small community comes as close as
any other.
Like a monopoly seller, a monopsony buyer is a price maker with complete market control.
Monopsony is also comparable to monopoly in terms of inefficiency. Monopsony does not
generate an efficient allocation of resources. The price paid by a monopsony is lower and the
quantity exchanged is less than with the bench market of perfect competition.
.DIPLOMA IN BUSINESS MANAGEMENT

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2.0 Characteristics of Monopsony
The three key characteristics of monopsony are a single firm buying all output in a market, no
alternative buyers, and restrictions on entry into the industry.
1. Single Buyer:
First and foremost, a monopsony is a monopsony because it is the only buyer in the market. The
word monopsony actually translates as "one buyer." As the only buyer, a monopsony controls the
demand-side of the market completely. If anyone wants to sell the good, they must sell to the
monopoly.
2. No Alternatives:
A monopsony achieves single-buyer status because sellers have no alternative buyers for their
goods. This is the key characteristics that usually prevent monopsony from existing in the real
world in its pure, ideal form. Sellers almost always have alternatives.
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3. Barriers to Entry:
A monopsony often acquires and generally maintains single buyer status due to restrictions on
the entry of other buyers into the market. The key barriers to entry are much the same as those
that exist for monopoly:
(a) Government license or franchise
(b) Resource ownership
(c) Patents and copyrights
(d) High start-up cost
(e) Decreasing average total cost

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3.0 Competition of the Market
A market structure characterized by a large number of small buyers, that purchase similar but not
identical inputs, have relative freedom of entry into and exit out of the industry, and possess
extensive knowledge of prices and technology. Monopsony competition is the buying-side
equivalent of a selling-side monopolistic competition. Much as a monopolistic competition is a
competitive market containing a number of small sellers, monopsonistic competition is a market
containing a number of small buyers. While monopsony competition could be analyzed for any
type of market it tends to be most relevant for factor markets. Two related buying-side market
structures are monopsony and oligopsony.
Monopsony competition is a market in which a large number of relatively small buyers purchase
goods (usually factor inputs) that are similar but not identical. While the market for any type of
good, service, resource, or commodity can, in principle, function as monopsony competition, this
form of market structure tends to be most pronounced for the exchange of factor services.
This market structure is the somewhat obscure and less noted buying counterpart of monopolistic
competition. However, monopsony competition tends to be just as prevalent in the real world. In
fact, firms operating as monopolistic competition in an output market often operate as
monopsony competition in an input market.

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In much the same way the monopolistic competition is a cross between perfect competition
and monopoly, monopsonistic competition is a cross between perfect competition and
monopsony. While each monopolistically competitive buyer has very little market control, it
does have some market control, each has its own little monopsony, and each faces an input
supply curve that is relatively elastic but not perfectly elastic.

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4.0 Factor Market Analysis
The analysis of a factor market characterized by monopsony indicates that the single buyer
maximizes profit by equating marginal revenue product to marginal factor cost. This results in a
lower price and smaller quantity than achieved with perfect competition. As such, it does not
achieve an efficient allocation of resources. Monopsony is combined with monopoly to form a
bilateral monopoly market structure.
Monopsony is a market dominated by a single firm buying the product. Monopsony is the
buying-side equivalent of a selling-side monopoly. Much as a monopoly is the only seller in a
market, monopsony is the only buyer. While monopsony can be analyzed for any type of market,
it tends to be most relevant for factor markets in which a single firm does all of the buying of a
factor of production.
Comparable to a monopoly seller, a monopsony buyer is a price maker with complete market
control on the buying side of the market. Monopsony is also comparable to monopoly in terms
of inefficiency. Monopsony does not generate an efficient allocation of resources. The price paid
by a monopsony is lower and the quantity exchanged is less than would be had by perfect
competition.

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DIPLOMA
IN
BUSINESS
MANAGEMENT
11
4.1 A Hypothetical Example
One example of a monopsony factor market is the hypothetical Natural Ned Lumber Company,
which is a lumbering operation in the isolated Jagged Mountains region north of the greater
Shady Valley metropolitan area. The Natural Ned Lumber Company is an expansive operation
employing several thousand workers, all of whom reside in Lumber Town, which is adjacent to
the Natural Ned Lumber Company lumbering operations. In fact, everyone is living in Lumber
Town works for the Natural Ned Lumber Company.
This makes the Natural Ned Lumber Company a monopsony employer. If anyone in Lumber
Town seeks employment, then they must seek it with the Natural Ned Lumber Company. As
such, the Natural Ned Lumber Company is a price maker when it comes to buying labor services.
The Natural Ned Lumber Company can the determine of labor services desired, then charge the
minimum factor price that sellers are willing and able to receive.
While the Natural Ned Lumber Company and Lumber Town is obviously a fictitious example of
a monopsony, it does illustrate one of the more prevalent categories of monopsony that existed in
the early history of the U.S. economy--the company town. During the early days of the U.S.
industrial revolution, the late 1800s through the early 1900s, it was quite common for a large
industrial facility (factory, mining operation, lumber company) to dominate employment in a
given area. In some cases, the company literally built and owned the town in which the workers
lived. Even those people who did not work directly in the primary activity (mining, lumber, etc.)
worked in the company-owned store, hospital, school, or theater. Hence the term company town.

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4.2 Modern Monopsony
Like other extreme market structures (perfect competition and monopoly) monopsony is only
approximated in the real world. Achieving the status of THE ONLY BUYER is not easy. Few if
any buyers actually achieve this status. However, several have come close. In modern times a
few examples of markets that come very close to monopsony come from the world of sports.
Should a talented quarterback wish to obtain a job as a professional football player, then THE
employer is the National Football League (NFL). Of course, the NFL is not absolutely the ONLY
employer. Employment as a professional football player can also be found with the Canadian
Football League (CFL). However, sufficient difference exists between these two employers to
give the NFL significant monopsony control.
Similar near monopsony status exists for other professional sports. A professional baseball player
seeks employment with Major League Baseball (MLB), with minimal competition from Japan. A
profession basketball player seeks employment with the National Basketball Association (NBA),
with minimal competition from Europe. A profession hockey player seeks employment with the
National Hockey League (NHL), again with some competition from Europe.
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Other modern markets that exhibit varying degrees of monopsony status can be found in
collegiate sports and the National Collegiate Athletic Association (NCAA) and the medical
profession and the American Medical Association (AMA). Much like a professional football,
baseball, basketball, or hockey player seeks employment in the "big leagues," a collegiate athlete
seeks "employment" with a college affiliated with the NCAA. In a similar manner, a physician
seeks "employment" through the AMA.
The reasons for quotation marks around employment for these two examples are that the
monopsony employer does not technically employ these workers in a traditional sense.
Monopsony status, however, is attributable to the ability to influence the factor market. In other
words, a collegiate athlete who does not satisfy NCAA guidelines has difficulty "working" for a
university that is providing athletic entertainment services through the college in return for a
scholarship. A physician who does not satisfy AMA guidelines also has difficulty working at a
hospital or in private practice.

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4.3 Supply and Cost
Single-buyer status means that monopsony faces a positively-slopedsupply curve, such as the
one displayed in the exhibit to the right. In fact, the supply curve facing the monopsony is the
market supply curve for the product.
The far right curve in the exhibit is the red supply curve (S) facing the monopsony. The far left
curve is the blue marginal factor cost curve (MFC). The marginal factor cost curve indicates the
change in total factor cost incurred due to buying one additional unit of the good.
Because a monopsony is a price maker with extensive market control, it faces a positively-sloped
supply curve. To buy a larger quantity of output, it must pay a higher price. For example, the
monopsony can hire 10,000 workers for a wage of $5. However, if it wants to hire 20,000
workers, then it must raise the wage to $6.10.
For this reason, the marginal factor cost incurred from hiring extra workers is greater than the
wage, or factor price. Suppose for example that the factor price needed to hire ten workers is $5
and the factor price needed to hire eleven workers is $5.10. The marginal factor cost incurred due
to hiring the eleventh unit is $6.10. While the $6 factor price means the monopsony incurs a
$5.10 factor cost from hiring this worker, this cost is compounded by an extra cost of $1 due to
the higher wage paid to the first ten workers. The overall increase in cost, that is marginal factor
cost, is thus $6.10 (= $5.10 + $1).

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5.0 Monopsony Cost and Revenue

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An example that can illustrate a monopsony factor market is provided by the Natural Ned
Lumber Company. This is a hypothetical lumbering operation in the isolated Jagged Mountains
region north of the greater Shady Valley metropolitan area. The Natural Ned Lumber Company is
an expansive operation employing thousands of workers, all of whom reside in Lumber Town,
which is adjacent to the Natural Ned Lumber Company lumbering operations. In fact, everyone
living in Lumber Town works for the Natural Ned Lumber Company.
This makes the Natural Ned Lumber Company a monopsony employer. If anyone in Lumber
Town seeks employment, then they must seek it with the Natural Ned Lumber Company. This
makes the Natural Ned Lumber Company a price maker when it comes to buying labor services.
The Natural Ned Lumber Company can determine the quantity of labor services desired, then
charge the minimum factor price that workers are willing and able to receive.
This diagram displays the market for labor services in Lumber Town. The vertical axis measures
the factor price (wage rate) and the horizontal axis measures the quantity of labor services
(number of workers). The key for any monopsony buyer like the Natural Ned Lumber Company,
is that the supply curve it faces for hiring labor is The market supply curve for the factor.
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Supply:
The resulting curve, labeled S, is positively sloped, indicating that workers require a
higher wage to increase the quantity supplied. More to the point, if Natural Ned wants to
hire more workers, it must pay a higher wage. This supply curve is also the average factor
cost curve for Natural Ned.
Marginal Factor Cost:

As a profit-maximizing monopsony with market control, the Natural Ned Lumber
Company does not achieve an efficient allocation of resources. This results because
marginal revenue product is not equal to the factor price. While the Natural Ned
Lumber Company pays a factor price of $8.40 per hour, marginal revenue product is
$13 per hour.
Marginal Revenue Product:

The other half of Natural Ned's profit-maximizing decision is marginal revenue product.
Marginal revenue product indicates the change in revenue resulting from hiring one
additional worker. This curve is negatively-sloped because marginal revenue product is
based on marginal physical product which declines with extra employment due to of
the law of diminishing marginal returns. Because each additional worker is less
productive, each additional worker generates less extra revenue.
5.1 Profit Maximizing Employment
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All of the information needed to identify the quantity of workers that maximizes Natural
Ned's profit is in hand. The profit-maximizing employment is the quantity that equates
marginal factor cost and marginal revenue product, which is the intersection of the MFC and
MRP curves. The profit-maximizing quantity of employment is 37,000 workers.
Why is this profit maximization?
Should Natural Ned hire fewer than 37,000 workers, then marginal revenue product is
greater than marginal factor cost. An extra worker contributes more to revenue than it
adds to cost. This increases Natural Ned's profit. Natural Ned should hire any worker
with a marginal revenue product that exceeds marginal factor cost.
Should Natural Ned hire more than 37,000 workers, then marginal revenue product is less
than marginal factor cost. An extra worker contributes less to revenue than it adds to cost.
This decreases Natural Ned's profit. Natural Ned should fire any worker with a marginal
revenue product that is less than marginal factor cost.
Should Natural Ned hire exactly 37,000 workers, then marginal revenue product is equal
to marginal factor cost. The last worker hired contributes as much to revenue as to cost.
This keeps Natural Ned's profit constant. Natural Ned should hire workers up to the point
that marginal revenue product is equal to marginal factor cost, but no more.
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Once Natural Ned identifies the profit-maximizing employment, the final step is to determine
how much to pay each worker. This information is found on the market supply curve (S).
According to the market supply, a wage of $8.40 is sufficient to entice 37,000 workers to supply
their labor services. Because Natural Ned is a monopsony, it needs to pay no more than this
wage.
5.2 Inefficiency
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As a profit-maximizing monopsony with market control, the Natural Ned Lumber Company does
not achieve an efficient allocation of resources. This results because marginal revenue product is
not equal to the factor price. While the Natural Ned Lumber Company pays a factor price of
$8.40 per hour, marginal revenue product is $13 per hour.
This difference between factor price and marginal revenue product is a prime indicator of
inefficiency. Marginal revenue product is the value of the good produced. Factor price is
the opportunity cost of production, the value of goods not produced. If the two are equal, then the
value of the good produced is equal to the value of goods not produced. Society cannot generate
more overall satisfaction by producing more or less of the good.
However, for a monopsony like Natural Ned, marginal revenue product is greater than factor
price. In this case, the value of the good produced is greater than the value of goods not
produced. Society can generate more overall satisfaction by producing more of the good.
Because profit maximization means marginal revenue product is equal to marginal factor cost,
and because marginal factor cost is greater than factor price, marginal revenue product is also
greater than factor price for monopsony. A profit-maximizing monopsony does not, will not,
cannot, efficiently allocate resources.
6.0 The Other Three Market Structures
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Monopsony is one of four market structures that arise in the analysis of factor markets. The other
three are: perfect competition, oligopsony, and monopsonistic competition. The exhibit to the
right illustrates how these four market structures form a continuum based on the relative degree
of market control and the number of competitors
in the market. At the far right of the market structure continuum is monopsony, characterized by
a single buyer and extensive market control.
Market Structure Continuum
Perfect Competition: To the far left of the market structure continuum is perfect
competition, characterized by a large number of relatively small competitors, each with
no market control. Perfect competition is an idealized market structure that provides a
benchmark for evaluating the efficiency of the other market structures.
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Oligopsony: In the middle of the market structure continuum, residing closer to

monopsony is oligopsony, characterized by a small number of relatively large
competitors, each with substantial market control. This is the buying-side counterpart of
oligopoly on the selling side. A substantial number of real world markets fit the
characteristics of oligopsony.
Monopsonistic Competition: Also in the middle of the market structure continuum, but
residing closer to perfect competition, is monopsonistic competition, characterized by a
large number of relatively small competitors, each with a modest degree of market
control. This is the buying-side counterpart of monopolistic competition on the selling
side. A substantial number of real world markets fit the characteristics of monopsonistic
competition.
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7.0 Conclusion
The models of this topic have been highly stylized with assumptions for analytical convenience
more than for realism. Nonetheless, they do convey the essence of a labor market with frictions
in which employers set wages influenced in part by competition from other employers but in
which this competition is not to cutthroat as to enable workers to extract all the surplus from the
employment relationship, nor so feeble as to enable employers to get all the surplus.
A lot of analysis in this topic has been very formal. But, one should not allow this to distract
attention away from the basic insights into the workings of labor markets that the monopsonistic
approach provides. The rest of this concerned with the determinants of prices and quantities in
the labor market, a traditional pre-occupation of microeconomics. The study of prices is
essentially the study of the distribution of wages while the study of quantities is the study of the
level and distribution of unemployment, the level of employment in firms, and of the quality of
labor ( as influenced by the acquisition of human capital ). These implications of monopsony are
summarized briefly for these issues.
These conclusions then justify the approach in the rest of the book which is to use the
perspective of employer market power to understand a wide variety of labor market phenomena,
without making any value judgement as to whether the world could be improved by an
appropriate policy intervention.
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References
http://books.google.com.my/books?
id=AMMeAgAAQBAJ&pg=PA49&lpg=PA49&dq=end+of+MONOPSONY&source=bl&o
ts=A9rp3-8UXf&sig=swW3QMK9TqDB48ZMdpriv4Rg5E&hl=en&sa=X&ei=8_jUUufqJsj_iAfpyIDICg#v=one
page&q=end%20of%20MONOPSONY&f=false
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=multiplier,
%20aggregate%20market
http://www.investopedia.com/tags/microeconomics/
http://www.economics.utoronto.ca/jfloyd/modules/lmcm.html
http://www.econpage.com/301/handouts/labormkts/labor2.html
^ Kulbacki, James W. (April 1992). "A Look at the Space Industry". Industrial College of the
Armed Forces(ADA262201): 32. "The space industry can be characterized as both an Oligopoly
and a Monopsony."
Jump up^ Kerr, Prue; Harcourt, Geoff (2002). Joan Robinson: Critical Assessments of Leading
Economists. Taylor & Francis. pp. 23.ISBN 0-415-21743-1

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WINFIELD INTERNATIONAL COLLEGE

SCHOOL OF BUSINESS MANAGEMENT
ECO 2014

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OBJECTIVE
In the purely competitive labor market described in the preceding section, each employer hires
too small an amount of labor to influence the wage rate. Each firm can hire as little or as much
labor as it needs, but only at the market wage rate, as reflected in its horizontal labor supply
curve. The situation is quite different when the labor market is a monopsony, a market structure
in which there is only a single buyer. A labor market monopsony has the following
characteristics:
There is only a single buyer of a particular type of labor.
The workers providing this type of labor have few employment options other than
working for the monopsony, because they are either geographically immobile or because
finding alternative employment would mean having to acquire new skills.
The firm is a wage maker, because the wage rate it must pay varies directly with the
number of workers it employs.

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ARTICLES ON MONOPSONY
PERMANENT LINK | FEBRUARY 22, 2013
The Minimum Wage and Monopsony
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There's been a fair amount of discussion on the web lately (here and here, for instance)
about the minimum wage and monopsony. As is well known in economics, a skillfully set
minimum wage, in the presence of monopsony in the labor market, can
actually increase employment. I don't have a graphical proof handy but I expect that many
labor economics texts have such a graphical proof.
Here's the proof in words. To say that a firm has monopsony power is to say that the supply
curve of labor to the firm is upward-sloping. That is, the firm is not a price-taker in the labor
market. So when the firm that employs n workers and pays Wn per worker wants to hire
one additional worker, it needs to pay more to each worker than it paid when it hired n
workers. Call this new wage Wn + x. But that means that the cost of hiring that n + 1st
worker is not the wage, Wn + x, that the firm pays the worker: it's that wage, Wn + x, plus
x times n. The reason: it pays all the other n workers that increment, x, also. Because the
firm recognizes this, it hires up to the point where the value of marginal product = Wn + x
+ x*n. Now, if the government skillfully sets a minimum wage a little above Wn + x, the
firm knows that it can't reduce the wage by hiring fewer people and also knows that it won't
raise the wage by hiring a few more people and so it hires more people.
The main reason people started talking about monopsony in the context of the minimum
wage in the 1990s was the study, and later the book, by David Card and Alan Krueger. They
were trying to explain why they found their result, which was that an increase in the
minimum wage in New Jersey, while the minimum wage in Pennsylvania held constant, did
not decrease employment in fast food restaurants in New Jersey relative to in Pennsylvania.
Various people, most notably David Neumark and William Wascher, criticized the
Card/Krueger data and, using better data, found the more-standard result. I don't want to
get into that here.
Instead, I want to note something about the monopsony explanation. Here's what I wrote in
my review of their book:
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What would have to be true for the minimum wage not to destroy jobs? As George
Stigler (1946) pointed out in his seminal article on minimum wages, if the employer has
monopsony power in the labor market, a skillfully set minimum wage can actually increase
employment. Card and Krueger are aware of this exception, and they speculate in Chapter
11 that the market for unskilled labor is indeed monopsonistic. How could the market for
unskilled labor be monopsonistic when so many employers are competing for unskilled
labor? Card and Krueger have a few answers and, at the same time, no answers. They
discuss (pp. 373-83) various models in which firms set different wage rates for the same
quality of labor, but they don't ever say which model they think explains their results. In two
models they analyze, some firms set high wages and workers respond with lower turnover,
while other firms set lower wages and accept higher turnover. A minimum wage, then, could
reduce turnover at the low-wage firms. Card and Krueger claim that lower turnover implies
higher average employment. I don't think so. There's reason to believe that employment
would, on average, be lower. Presumably, low-wage, high-turnover employers believed
themselves to be maximizing profits. That is, the loss from the increment of turnover was
less than the loss from paying higher wages to avoid that increment of turnover. Given that
assumption, when the government steps in and imposes a minimum wage, the net cost of
an employee is higher. By the law of demand, the employer will hire fewer employees.
Interestingly, Card's and Krueger's own data on price contradict one of the implications of
monopsony. If monopsony is present, a minimum wage can increase employment. These
added employees produce more output. For a given demand, therefore, a minimum wage
should reduce the price of the output. But Card and Krueger find the opposite. They write:
'[P]retax prices rose 4 percent faster as a result of the minimum-wage increase in New
Jersey...' (p. 54). If their data on price are to be believed, they have presented
evidence against the existence of monopsony. David R. Henderson, "Rush to
Judgment," MANAGERIAL AND DECISION ECONOMICS, VOL. 17, 339-344 (1996)
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October 3, 2010
The Problem with a Health Care Monopsony

By Jeffrey M. Spiers
Americans detest monopolies. And rightly so. Theoretically, monopolies represent an

inefficient allocation of scarce resources. The monopolist is adept at converting consumer
surplus into producer surplus since fewer goods are produced at a higher price. Remember
long-distance telephone services? Under Ma Bell, prices were higher and services anemic.
Today, the cost of long-distance telephone service is inconsequential. Americans tend to
value increased competition and fear monopoly power.
The monopolist has the luxury of producing fewer goods or services while charging a higher
price. In this country, "uncompetitive" equates to "un-American." We not only desire
competition; we expect it. The competitive free
market produces a surplus that society has
come to expect and enjoy in the United States.
But one man's surplus is the Leftists' excess.

And to the Left, excess is to be avoided. Think
greed, avarice, inefficient, unfair.
The rhetoric used against insurers in recent

days makes it seem like the executive branch
is back to monopoly-busting, giving the
impression that they are performing a public
service. But with over 1,300 health insurers in
this country, rationality dictates that we describe the existing marketplace in terms that
approach competitive rather than monopolistic.
In the six months since President Obama signed health reform into law, competition has
decreased. Unable to meet health reform law requirements, smaller, regional health insurers
have merged or have been acquired. As a result, fewer insurers exist today than six months
ago. This outcome squarely contradicts what the administration claimed; fewer insurers
mean less competition among insurers.
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The health insurance marketplace will continue to contract. Witness last week's beat-down
on insurers who dared justify 1% to 9% premium increases to compliance with the new law.
Secretary Sebelius has a list and will be checking it twice! This unfriendly, adversarial
relationship between the government and health insurers will eventually cause insurers to
exit the marketplace altogether. Rather than be
saddled with increased financial risks without
the ability to price health policies accordingly,
insurers will simply remove themselves from the
spotlight of public humiliation and financial ruin.
In this new environment of fewer and fewer

willing (and compliant) health insurers, what will
happen to the cost of health services and health
insurance? The answer lies not with the
economics of a monopoly, but with the
economics of monopsony power. A monopoly is
the single seller of a well-defined good or
service for which there are no close substitutes
in the marketplace. A monopsony is the
single buyer of a good or service. The
accompanying graph illustrates the economic outcome of the monopsony model using
inpatient hospital days as a basis for comparison.
Point C represents equilibrium in a competitive marketplace. Price PC is the market clearing

price for quantity of inpatient hospital days demanded QC. With a single buyer of hospital
inpatient services, the monopsonist must pay a higher price for all additional services as
represented by the marginal factor cost curve (MFC) because he must negotiate the cost of
inpatient days in advance. To compensate, our monopsonist reduces the price from P C
to PM by reducing quantity supplied from QC to QM, otherwise known as "rationing." Monopsony
power suggests a single buyer pays a lower price but purchases a lower quantity than the
competitive marketplace would support. Who can argue with lower prices?
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But will society actually see a price reduction in health insurance? This is doubtful. In the
monopsonist model, we assumed demand and supply were static. Health reform will add
some 30 million to the insured rolls, which will translate to increased demand. Health reform
has also thinned the ranks of providers translating to decreased supply. Here's the
monopsonist graph again with these two adjustments:
With supply reduced and demand increased, the competitive marketplace equilibrium shifts
to point C*. Marginal factor costs are still higher than the new supply curve, forcing the
monopsonist to pay more hospital stays. To compensate, quantity is reduced from QC to
QM*, reflecting the profit maximization price PM*. The net effect of ObamaCare will be fewer
insurers leading to a government-run, singlepayer monopsony health care system; fewer
services provided by the system (with still
fewer providers); and higher prices paid by
all.
The societal cost of a single-payer health

system is the dead-weight loss of the formerly
enjoyed surplus provided by a competitive
market compounded with increased costs. This
outcome is identical to that of the monopoly:
higher prices paid for fewer services from
fewer providers. Adam Smith was right. Free
markets provide the most societal good in the
most efficient manner. This is why Americans
detest monopolies. But you already knew that.
What you didn't know is that Americans also hate monopsonies.
on "The Problem with a Health Care Monopsony"
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PRINCIPLES OF MICRO ECONOMICS

According to Amos Web, a market characterized by a single buyer of a product. Monopsony is

.DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

2.0 Characteristics of Monopsony

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

3.0 Competition of the Market

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

PRINCIPLES OF MICRO ECONOMICS

4.0 Factor Market Analysis

PRINCIPLES OF MICRO ECONOMICS

4.1 A Hypothetical Example

PRINCIPLES OF MICRO ECONOMICS

4.2 Modern Monopsony

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

4.3 Supply and Cost

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

5.0 Monopsony Cost and Revenue

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

Marginal Factor Cost:

Marginal Revenue Product:

DIPLOMA IN BUSINESS MANAGEMENT

5.1 Profit Maximizing Employment

PRINCIPLES OF MICRO ECONOMICS

Why is this profit maximization?

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

6.0 The Other Three Market Structures

PRINCIPLES OF MICRO ECONOMICS

Market Structure Continuum

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PRINCIPLES OF MICRO ECONOMICS

Oligopsony: In the middle of the market structure continuum, residing closer to

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

PRINCIPLES OF MICRO ECONOMICS

WINFIELD INTERNATIONAL COLLEGE

PRINCIPLES OF MICRO ECONOMICS

There is only a single buyer of a particular type of labor.

DIPLOMA IN BUSINESS MANAGEMENT

PRINCIPLES OF MICRO ECONOMICS

PERMANENT LINK | FEBRUARY 22, 2013