Monopsonistic factor markets and monopolistic output markets are similar in that both generate:

Question

Quizplus · Accepted Answer

Both monopsonistic factor markets and monopolistic output markets lead to an inefficient allocation of resources. In monopsonistic factor markets, the monopsonist has market power over the factor of production, leading to them paying lower wages than what would be paid in a perfectly competitive market. This can lead to a situation where some workers are excluded from the labor market altogether, leading to an inefficient allocation of labor. In monopolistic output markets, the monopolist can set prices above marginal cost, leading to an inefficiently low level of output.

Monopsonistic Factor Markets and Monopolistic Output Markets Are Similar in That