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Unformatted text preview: Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT OpenCourseWare (http://ocw.mit.edu), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY]. 1 1 Monopsony 14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 14, 2007 Lecture 24 Monopoly and Monopsony Outline 1. Chap 10: Monopsony 2. Chap 10: Monopoly Power 3. Chap 11: Price Discrimination 1 Monopsony A monopsony is a market in which there is a single buyer. Typically, a monop- sonist chooses to maximize the total value derived from buying the goods minus the total expenditure on the goods: V ( Q ) E ( Q ). Marginal value is the additional benefit derived from purchasing one more unit of a good; since the demand curve shows the buyers additional willingness to pay for an additional unit, marginal value and the demand curve coincide. Marginal expenditure is the additional cost of buying one more unit of a good. Average expenditure is the market price paid for each unit, which is determined by the market supply (see Figure 1). Now compare the competitive determined by the market supply (see Figure 1)....
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This note was uploaded on 05/05/2010 for the course PHY 8.02 taught by Professor D during the Spring '07 term at MIT.
- Spring '07