Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A monopsony has many buyers and one seller, while a monopoly has one buyer and many sellers.
B
A monopsony has many sellers and one buyer, while a monopoly has one seller and many buyers.
C
A monopsony and a monopoly are the same, both having one seller and one buyer.
D
A monopsony deals with the production of goods, while a monopoly deals with the distribution of goods.
Understanding the Answer
Let's break down why this is correct
Answer
A monopsony is a market situation where there is only one buyer for a product or service, while a monopoly is when there is only one seller. In a monopsony, the single buyer has significant power over the price and quantity of goods they purchase because there are no competing buyers to drive prices up. For example, if a large factory is the only employer in a small town, it can set lower wages since workers have no other job options. In contrast, a monopoly, like a sole provider of a unique product, can raise prices since there are no other sellers to compete with. Understanding these differences helps us see how each situation affects prices and choices in the market.
Detailed Explanation
A monopsony has one buyer and many sellers. Other options are incorrect because This option mixes up the roles; This option suggests they are the same, but they are not.
Key Concepts
monopsony vs. monopoly
Topic
Understanding Monopsonies
Difficulty
easy level question
Cognitive Level
understand
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