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Market power is defined as: a
Market power is defined as:
a. The collective will of consumers being imposed in a given market.
b. The ability of government to establish price controls.
c. The influence that imported goods have on the price of domestic goods.
d. The percentage of sales that a firm has in a given market.
e. The ability of a firm to control the price of the product it produces.
Expert Solution
- The correct answer is (e); the ability of a firm to control the price of the product it produces.
By having the authority over the market, a given firm can be able to manipulate the pricing of products it produces through manipulation of the demand and supply of the given commodity in the market. Market power is more experienced in a monopolistic or oligopolistic market structure where the producers have much said over the pricing of the products in the market. The market power mainly benefits the producers as they can be able to maximize their profit margins by cutting on their production cost, and by deciding the best prices in the market depending on the demand and supply which they control.
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