A soybean processor has monopsony power over farmers. To maximize profit, how should it adjust purchases relative to the competitive level?
A) It should depress purchases below the equilibrium of perfect competition.
B) It should purchase the quantity where marginal revenue equals marginal cost.
C) It should purchase the quantity where marginal benefit equals marginal expenditure.
D) None of the above.

Question

Quizplus · Accepted Answer

A monopsonist maximizes profit by purchasing less than the competitive level, thereby depressing purchases below the equilibrium of perfect competition to lower the price paid to suppliers.

A Soybean Processor Has Monopsony Power Over Farmers