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MicroeconomicsOptimization, Experiments, and Behavior$
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John P. Burkett

Print publication date: 2006

Print ISBN-13: 9780195189629

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195189629.001.0001

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Monopoly and Monopsony Power

Monopoly and Monopsony Power

(p.155) 14 Monopoly and Monopsony Power

John P. Burkett

Oxford University Press

This chapter discusses microeconomic theories of monopoly and monopsony. It explains that monopoly is a market for a product sold by a single supplier and lacking close substitutes while monopsony is a market with a single buyer. The profitability of a monopoly is sustained by entry barriers and entry deterrence and a nondiscriminating profit-maximizing monopoly produces the quantity for which its marginal cost equals its marginal revenue. Under the monopsonistic market, the employer hires just enough labor so that the value of labor's marginal product equals the firm's marginal expenditure on labor. This chapter also discusses monopolistic and monopsonistic competition. It also provides several relevant computational exercises and solutions.

Keywords:   monopoly, monopsony, market, profit maximization, marginal product, marginal expenditure, competition

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