Market power is best described as when the firm's demand curve is: a) positively sloped

Marketing Jan 14, 2021

Market power is best described as when the firm's demand curve is:

a) positively sloped.

b) a horizontal line.

c) a vertical line.

d) downward-sloping.

e) above the industry demand curve.

Expert Solution

The answer is D.

The power a firm has in the market is described when the demand curve is (d) downward sloping. When the curve is sloping downwards, a firm can change the price of the commodity by changing quantity thus manipulating demand and supply. When the curve is a vertical line, it implies that the firm can only produce at a fixed quantity thus lacks the power to control prices. When the curve is horizontal then demand for the particular product is perfectly elastic at a fixed price thus limiting the power of the firm.

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