This is a type of market structure where just one dominant buyer exists and there are many sellers.
Most common form of monopsony is the sole buyer of labour with many workers supplying their labour at a given wage rate e.g. the government employing workers for public services. Below is a diagram to illustarte the market structure of a monopsony in the labour market. The most striking part of this diagram is the increasing marginal cost curve for labour that these types of firms face. This is because as the firm is only employer of labour in this market if they wish to hire additional workers they have to offer higher wages but not only do they have to pay the new employee the higher wage but all the other existing workers wages will need to be increased as well.
