Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

302 INPUT PRICING AND EMPLOYMENT [CHAP. 13
(b)
Fig. 13-18
13.18 If QS a ¼ 35P a , if there are 100 firms identical to that of Problem 13.17 demanding input A, and all these
100 firms are monopolists in their respective commodity market, (a) find the equilibrium market price
and quantity for input A. (b) How would this differ if, instead, some or all of the firms were oligopolists
or monopolistic competitors in the commodity market(s)?
(a)
Fig. 13-19
(b)
The effects of changes in P a on the price of the final commodities produced by the firms using input A have
already been considered in deriving their d a . Thus, there is no external effect to be considered, and D a is
obtained by the straightforward horizontal summation of each firm’s d a . The intersection of D a and S a
gives the equilibrium P a ¼ $20. At this price each firm will use seven units of input A for a total of 700
units (see Fig. 13-19).
Before we can derive D a we must consider the external effects of a change in P a for each of the nonmonopolists.
These external effects operate as described in Problem 13.6, except for the further complication introduced
by oligopolistic uncertainty and product differentiation (see Sections 10.4 to 10.12).
MONOPSONY
13.19 (a) What is meant by monopsony? (b) How does monopsony arise? (c) What is meant by oligopsony and
monopsonistic competition?
(a)
Monopsony refers to the form of market organization where there is a single buyer of a particular input. An
example of monopsony is given by the “mining towns” of yesteryear in the United States, where the mining
company was the sole employer of labor in town (often these mining companies even owned and operated a
single “company store” in town).