Question

Given below are two statements :
Statement (I) : Monopsony is a perfect competition.
Statement (II) : Monopoly is an imperfect competition.
In light of the above statements, choose the most appropriate answer from the options given below.

• A. Both Statement (I) and Statement (II) are true.
• B. Both Statement (I) and Statement (II) are false.
• C. Statement (I) is true but Statement (II) is false.
• D. Statement (I) is false but Statement (II) is true.

Hint:

Remember:
- "Mono-" means single.
- "-poly" refers to seller (Monopoly = single seller).
- "-psony" refers to buyer (Monopsony = single buyer).
Both are extreme forms of imperfect competition.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Market structures are classified in economics based on the number of buyers and sellers, product differentiation, and ease of entry and exit.
These structures are broadly divided into perfect competition and imperfect competition (which includes monopoly, oligopoly, monopolistic competition, and monopsony).

Step 2: Detailed Explanation:
Let us analyze both statements:
- Statement (I) is incorrect. A monopsony is a market structure characterized by the presence of only one buyer and many sellers.
Because the single buyer can influence prices and restrict market demand, a monopsony is a classic form of imperfect competition, not perfect competition.
An example is a single fish processing plant buying catches from many local fishermen.
- Statement (II) is correct. A monopoly is a market structure characterized by a single seller and many buyers.
Because the monopolist has significant control over product pricing and supply due to high barriers to entry, it represents an imperfectly competitive market.
Therefore, Statement (I) is false and Statement (II) is true.

Step 4: Final Answer:
Statement (I) is false but Statement (II) is true, which corresponds to Option (D).