A monopsony differs from a monopoly in that:
A)the market capitalization of a monopsony firm is smaller than a monopoly firm.
B)the input price under a monopsony is higher than the input price in a monopoly.
C)a monopsony has market power in the input market while a monopoly has market power in the product market.
D)a monopsony faces a downward-sloping input demand curve while a monopoly faces an upward-sloping input demand curve.

Question

Quizplus · Accepted Answer

A monopoly has market power in the product market, allowing it to set the price of its product above the competitive level. On the other hand, a monopsony has market power in the input market, allowing it to lower the price it pays for inputs (such as labor or raw materials) below the competitive level. This distinction is important because a monopolist may still face competition in the input market, while a monopsonist may still face competition in the product market. Therefore, the correct answer is C.

A Monopsony Differs from a Monopoly in That