Explain how the equilibrium position of a monopsonistically
competitive firm is achieved in the long...

Question

Explain how the equilibrium position of a monopsonistically
competitive firm is achieved in the long run and how it may differ from the
equilibrium position of the firm in the short run.

David · Accepted Answer

Solution 
In a monopsonistically competitive industry, there is large number of small buyers. It is 
the counterpart of monopolistically competitive industry. The difference between the two is that 
the former is about the input market and latter is an output market industry. In monopsonistically 
competitive industry there is large number of small buyers of labour input for example and they 
buy similar kind of labour but not identical labour. Entry and exit is relative free in this market 
and it is less efficient than perfectly competitive market of labour input.

Explain how the equilibrium position of a monopsonistically competitive firm is achieved in the long run and how it may differ from the equilibrium position of the firm in the short run.

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