In the personal computer market, some large manufacturers are able to buy computer components (e.g., disk drives, flat-screen monitors, and memory chips) and software at lower prices than smaller firms in the market. This outcome indicates that the large firms enjoy some degree of ________ in this market.

Question

Quizplus · Accepted Answer

The fact that large manufacturers are able to buy computer components and software at lower prices than smaller firms suggests that they have monopsony power. Monopsony power refers to a situation in which there is only one buyer in a market. Therefore, the large manufacturers are able to negotiate lower prices because they have the power to dictate terms to suppliers. This is different from monopoly power (which refers to a situation in which there is only one seller) and oligopoly power (which refers to a situation in which there are only a few sellers). Oligopsony power (which refers to a situation in which there are only a few buyers) is not applicable to this scenario.

In the Personal Computer Market, Some Large Manufacturers Are Able