Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
There is only one buyer in the market
B
There are multiple buyers and one seller
C
There is only one seller in the market
D
There are multiple buyers and multiple sellers
Understanding the Answer
Let's break down why this is correct
Answer
A monopsony in factor markets is a situation where there is only one buyer for a particular type of labor or resource. This means that the single buyer has significant power over the price they pay for that labor or resource because workers or suppliers have limited options for selling their services or goods. For example, if a small town has only one factory that hires workers, that factory can set lower wages because workers cannot easily find other jobs nearby. As a result, the factory may pay less than what workers might earn in a competitive market, leading to lower overall wages in that area. This imbalance can affect the quality of life for workers and creates challenges in the labor market.
Detailed Explanation
A monopsony happens when there is only one buyer in the market. Other options are incorrect because This option suggests there are many buyers, which is not true for a monopsony; This option describes a situation with one seller, not a monopsony.
Key Concepts
monopsony
Topic
Factor Markets and Monopsonies
Difficulty
easy level question
Cognitive Level
understand
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