Microeconomics: Theory and Applications with Calculus, 4e

11.7 Monopsony

We’ve seen that a monopoly, a single seller, picks a point—a price and a quantity combination—on the market demand curve that maximizes its profit. A monopsony, a single buyer in a market, chooses a price-quantity combination from the industry supply curve that maximizes its profit. A monopsony is the mirror image of monopoly, and it exercises its market power by buying at a price below the price that competitive buyers would pay.

Many fisheries have a single, monopsonistic buyer of fish. U.S. professional baseball teams, which act collectively, are the only U.S. firms that hire professional baseball players.24 Because an American manufacturer of state-of-the-art weapon systems can legally sell only to the federal government, ...