Quiz-81) Monopolyis considered to beinefficient from social point of view, because of monopoly underproduction, where firms have incentives to restrict output so as to create scarcity and earn economic profit gives rise to dead weight loss. In addition monopoly can result in social cost if monopolists fail to employ cost-effective production methods and it causes a significant transfer of consumer surplus to producer surplus.Monopoly: A market structure characterized by a single seller of a highly differentiated product. Monopoly firms are price makers. Today, there is no pure monopoly market but a natural monopoly market exits in electricity, gas and sanitary services.Monopsony: Market in which there is a single buyer of a desired product or input. Monopsony power enables the buyer to obtain lower prices than those that would prevail in a competitive market. For example monopsony power characterizes local labor markets with a single feed meal or grain buyer. Similarly, federal government is a monopsony buyer of military weapons and equipment. Major retailers such as Wal-Mart,
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