Market power guarantees profit

Marketing Jan 14, 2021

Market power guarantees profit.

a. True, which is why firm's locate as far away from each other as possible.

b. False, market power guarantees price greater than marginal cost

c. True, market power guarantees price greater than average cost.

d. False, market guarantees price equal to average cost.

Expert Solution

Market power guarantees a profit. b. False, market power guarantees price greater than marginal cost

Market powers enable a firm to charge a price higher than the marginal cost but do not guarantee a profit. Marginal cost refers to the additional cost incurred by a firm on the production of an extra unit of output. Sellers in monopoly markets enjoy market power.

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