processor to buy raw milk from dairy farmers in a particular area By forming a cooperative, farmers could counter the monopsony power of a processor with monopoly power of their own, creating a bilateral monopoly Today, with much lower transportation costs, dairy farmers can deal with a national market so that processors no longer have monopsony power But dairy farmers continue to have the right to form cooperatives As we have seen in an earlier chapter, dairy farmers also enjoy protection from federal programs that are designed to keep dairy prices high KEY TAKEAWAYS A firm that has monopoly power in the supply of a factor makes choices in the same manner as any monopoly firm; it maximizes profit by selecting a level of output at which marginal revenue equals marginal cost and selling that output at a price determined by the demand curve Unions have traditionally sought to raise wages and to improve working conditions by exerting market power over the supply of labor In bilateral monopoly, a monopsony buyer faces a monopoly seller Prices in the model are indeterminate Professional associations often seek market power through their influence on government policy Producers’ cooperatives, a form of legal cartel, have been organized in some agricultural markets in an effort to offset the perceived monopsony power of some buyers of agricultural products TRY IT! Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 770