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Homework answers / question archive / Market power is the power to: Select one: a
Market power is the power to: Select one:
a. control output.
b. reduce price below cost to deter entry.
c. control prices.
d. gain another firm's customers.
The correct answer is c. control prices.
The concept behind market power suggests that a company is positioned to direct prices to levels above the market rate or prices being charged by competitors while retaining customers. Market power is a level of control often associated with the behaviors of monopolies where a company dominates by controlling prices and quantities supplied in a market. Market power enables a company to manipulate prices to its advantage and with little concern for the welfare of the market and others. This status enables the company to be price makers when it is able to control prices and influence the availability of products and services.
Answers a, b, and d are incorrect.