The development of market power by a firm is considered to be a market failure because firms with market power will

Question

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When a firm has market power, it can control the price and quantity of its output. This may lead to the firm producing less than what would be socially optimal, resulting in a deadweight loss. Additionally, the firm may charge a higher price, increasing profits at the expense of consumer surplus. As a result, market power is considered a market failure because it can lead to inefficiencies and distortions in the market.

The Development of Market Power by a Firm Is Considered