The power to raise price above marginal cost without fear that other firms will enter the market is:
A) market power.
B) firm power.
C) marginal power.
D) cost power.

Question

Quizplus · Accepted Answer

Market power is the ability of a firm to raise prices above the marginal cost without facing any significant competition. This power allows the firm to earn a higher profit margin than it would have in a more competitive market. The absence of competition can arise from several factors such as barriers to entry, control over scarce resources, or network effects. Thus, market power is a critical determinant of the pricing and output decisions of firms and has a significant impact on consumer welfare and market efficiency.

The Power to Raise Price Above Marginal Cost Without Fear