A price maker is a firm that
A) sets the prices that the market makes.
B) has a price that covers all of its costs.
C) sets prices that maximize consumer surplus.
D) sets prices equal to that of the market.
E) has some market power.

Question

Quizplus · Accepted Answer

A price maker is a firm that has some degree of market power, meaning the firm has the ability to influence the market price of its product or service. Therefore, it does not set its prices equal to that of the market like a price taker. A price maker may have a price that covers all its costs, but that is not the defining characteristic of a price maker. The other choices are incorrect as they do not accurately describe what a price maker is.

A Price Maker Is a Firm That