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Homework answers / question archive / What is market power? Define market power, name a few sources of market power, and explain why market power is always a source of market inefficiency

What is market power? Define market power, name a few sources of market power, and explain why market power is always a source of market inefficiency

Marketing

What is market power? Define market power, name a few sources of market power, and explain why market power is always a source of market inefficiency.

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Market power is the control a firm has over its own activities and the trends of the market they are in. Market power typically is the result of a firm's size and market share. The larger a firm is and the more market share they have, the more market power the firm has as well. Market power that is heavily weighted to one firm will lead to inefficiency because of the lack of competition. Competition is the driving force behind efficiency. When one firm has substantial market power, competitors are not as capable of challenging the powerful firm to create better outcomes for consumers.