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How do I use a monopsony (product market) graph to show that a firm has more buying power over a supplier?

Economics Asked by Nabil C on August 31, 2020

For instance, Tesco has more buying power over British farmers. How would I show this on a monopsony graph where Tesco has a surplus?

One Answer

I am not sure what you mean by a monopsony graph. If you mean a graph wherein you show that Marginal Factor cost is not equal to the inverse input supply curve, then you do not need the graph at all. The fact that $MFC(x) neq w_x$ shows that the buyer has market power.

Not sure what you mean by having "more buying power".

Answered by Giskard on August 31, 2020

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