Monopsony in the Factor Market


Just as a monopolist is a sole seller in a market, a monopsonist is a sole buyer. If everyone in a small town works for a single coal mine, then the mine has monopsony power in the local labor market. A price-taking employer of a factor faces a horizontal supply curve, meaning that hire-price will be unaffected. But the monopsonist is the whole demand side of its market, so the factor supply curve it faces is upward slopping.

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