When comparing the market price of an input in a market characterized by bilateral monopoly to a perfectly competitive price:
A) the bilateral monopoly price is always higher than the competitive price.
B) there is no difference; the bilateral monopoly price equals the competitive price.
C) the bilateral monopoly price is always less than the competitive price.
D) the bilateral monopoly price can be higher than, lower than, or equal to the competitive price.

Question

Quizplus · Accepted Answer

In a market characterized by bilateral monopoly, both the firm and the supplier have some degree of market power, which allows them to set prices higher than in a perfectly competitive market. However, the final price will depend on the bargaining power of each firm, and it may be higher or lower than the competitive price. Therefore, the bilateral monopoly price can be higher than, lower than, or equal to the competitive price.

When Comparing the Market Price of an Input in a Market