Monopoly vs Monopsony
Monopoly and Monopsony are related concepts in AP Economics that students often mix up. In short: monopoly is a monopoly is a market structure with a single seller producing a unique product with no close substitutes and significant barriers to entry. Meanwhile, monopsony is a monopsony is a market structure with a single buyer and many sellers, giving the buyer market power. Here is how they compare side by side.
A monopoly is a market structure with a single seller producing a unique product with no close substitutes and significant barriers to entry.
A monopolist is the sole provider of a good or service and faces the entire market demand curve, allowing it to set price above marginal cost. Because of high barriers to entry, other firms cannot enter the market to compete.
A monopsony is a market structure with a single buyer and many sellers, giving the buyer market power.
In a monopsony, the single buyer can influence the price of the product by changing the quantity it purchases. This allows the monopsonist to pay a lower price than in a competitive market. Monopsony power can arise in factor markets, such as a large employer in a small town.