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Difficulty: EasyMonopsony and Other Buyer-Dominated Market Structures

A single major mining corporation is the sole buyer of labor services in a remote industrial town. Which market structure best describes this buyer-dominated market?

  1. A
    Monopoly
  2. MonopsonyAnswer
  3. C
    Oligopoly
  4. D
    Perfect competition

Answer

The market structure is a monopsony because there is only one buyer controlling the demand for labor in the market.
A market dominated by a single buyer is defined in economics as a monopsony. When a single firm is the sole employer of labor in a region, it possesses monopsony power over wage setting and employment levels.

Step-by-Step Solution

1
Identify the market participant controlling the market in the scenario.
The scenario describes a single mining corporation acting as the sole employer (buyer of labor).
Determining whether power lies on the supply (seller) or demand (buyer) side defines the market structure classification.
2
Apply economic taxonomy to match a single buyer market structure.
A market with a single buyer facing many competing suppliers/workers is defined as a monopsony.
Monopsony specifically addresses monopsonistic buyer power in input or factor markets.

Key Concept

Monopsony Market Structure
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Topics

Monopsony and Other Buyer-Dominated Market Structures

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