The ultimate constraint on market power is the market demand curve.

Question

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The market demand curve represents the maximum quantity of a good or service that consumers are willing to buy at a given price. If a company has market power (i.e. the ability to influence prices), it can only do so within the constraints of the market demand curve. If it tries to charge higher prices than what consumers are willing to pay, demand for its product will decrease and it will face competition from other companies. Therefore, the market demand curve serves as the ultimate constraint on market power.

The Ultimate Constraint on Market Power Is the Market Demand