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Factor markets -- i.e., markets for the factors of production, or resources -- are an area
in which the same individual can be both the buyer (of the resource) and the seller (of
the product that uses the resources). Furthermore, you could be a competitor as a buyer of resources
-- e.g., you compete with other businesses to hire labor, or to acquire capital -- even
while you have monopoly power in the market for your product/output. Conversely, you could
be a monopsony buyer of resources -- for example, you are the only employer in a small, isolated
town -- even while you compete with others to sell your product in a broader market.
If we look at two possible product (or output) market structures, perfect competition and
monopoly, AND two possible resource market structures, perfect competition and monopsony,
then that gives us a total of four scenarios to examine: (1) A perfectly competitive factor
market AND a perfectly competitive resource market; (2) A monopoly output market, with
perfect competition in the resource market; (3) A perfectly competitive output market
with a monopsony resource market; and (4) A monopoly product market, with a monopsony
resource market.
COMING UP: Looking at the factor market scenarios.