Question

What is a monopsony? Explain its characteristics as applied to a labor market.

Answer 1

Monopsony is a market condition in which there is only single buyer. Similar to monopoly, a monopsony also has imperfect market conditions. The only difference between the duo is : A single buyer dominates a monopsonized market while an individual seller controls a monopolized market.
In monopsony, there would be a large buyer who controls the market. A monopsony does not adhere to standard pricing from balancing supply-side and demand-side factors. In a monopoly, where there are few suppliers, the controlling entity can sell its product at a price of its on choice because buyers are willing to pay its designated price. In a monopsony, the controlling body is a buyer. It may use its size advantage to obtain low prices .
Monopsonies can take different forms and may occur in all types of markets. Some economists have accused Ernest and Julio Gallo–a conglomerate of wineries and wine producer for their mode of operation resembling a monopsony .                                                               Monopsony in Labour Market     .                                    Monopsony in labour market means means the potential employer who has buying power over their potential employees. This gives them a wage-setting power in the industry labour market.Monopsony is one of the main cause of labour market failure. For a monopsony employer, the supply curve of labour equal the average cost of labour. The monopsony employer will have to bid up wages in order to attract new employees
But the wage they pay wont be necessarily equal to the true marginal revenue product of people they have employed.