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Lecture

Monopsony and Imperfect Competition

In course

MGT-454: Principles of microeconomics

The course allows students to get familiarized with the basic tools and concepts of modern microeconomic analysis. Based on graphical reasoning and analytical calculus, it constantly links to real economic issues. ...

Description

This lecture explores the concept of monopsony, where a single buyer faces multiple sellers, leading to deviations from perfect competition. It delves into scenarios of monopsony in labor markets, analyzing wage rate determination, labor supply elasticity, and marginal cost of labor. The lecture also covers perfect competition, monopolistic exploitation of labor, and various market structures like duopoly and oligopoly. It discusses equilibrium conditions, profit maximization strategies, and the impact of different market structures on pricing and production decisions.

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Ontological neighbourhood

Economics

Macroeconomics: Competition, Markets

Microeconomics: Labor economics

Related concepts (32)

Imperfect competition

In economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market. Imperfect competition causes market inefficiencies, resulting in market failure. Imperfect competition usually describes behaviour of suppliers in a market, such that the level of competition between sellers is below the level of competition in perfectly competitive market conditions.

Marginal cost

In economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it refers to the rate of change of total cost as output is increased by an infinitesimal amount. As Figure 1 shows, the marginal cost is measured in dollars per unit, whereas total cost is in dollars, and the marginal cost is the slope of the total cost, the rate at which it increases with output.

Marginal revenue

Marginal revenue (or marginal benefit) is a central concept in microeconomics that describes the additional total revenue generated by increasing product sales by 1 unit. Marginal revenue is the increase in revenue from the sale of one additional unit of product, i.e., the revenue from the sale of the last unit of product. It can be positive or negative. Marginal revenue is an important concept in vendor analysis.

Profit maximization

In economics, profit maximization is the short run or long run process by which a firm may determine the price, input and output levels that will lead to the highest possible total profit (or just profit in short). In neoclassical economics, which is currently the mainstream approach to microeconomics, the firm is assumed to be a "rational agent" (whether operating in a perfectly competitive market or otherwise) which wants to maximize its total profit, which is the difference between its total revenue and its total cost.

Perfect competition

In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In theoretical models where conditions of perfect competition hold, it has been demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This equilibrium would be a Pareto optimum.

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