What is market power? Which of the following are factors that can create market power for a firm? Select all that apply.
Understand the Problem
The question is asking for the definition of market power and factors that can create market power for a firm. It offers multiple choice options for the definition and a selection of statements that apply to creating market power.
Answer
Differentiation of product and fewer competitors.
The extent to which a firm can charge a higher price without losing many customers. Factors creating market power include being able to differentiate one's product and having fewer competitors in the market.
Answer for screen readers
The extent to which a firm can charge a higher price without losing many customers. Factors creating market power include being able to differentiate one's product and having fewer competitors in the market.
More Information
Market power allows firms to set higher prices or control market outcomes. Differentiation reduces price sensitivity, and fewer competitors enhance control over pricing.
Tips
Common mistakes include confusing market power with just being a monopoly. Other firms may have market power even if they’re not the sole seller.
Sources
- What Is Market Power? - investopedia.com
- Guidelines on misuse of market power - accc.gov.au
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