Typical evidence for the existence of market power would be market prices:
A) below production costs.
B) equal to production costs.
C) above production costs.
D) varying with market supply and demand conditions.

Question

Quizplus · Accepted Answer

Market power implies the ability of a firm to influence market prices above the production cost level. Therefore, prices that are above production costs are a typical evidence of the existence of market power. Prices below production costs would indicate losses and are not sustainable in the long run. Prices equal to production costs suggest perfect competition, where firms earn only normal profits. Prices varying with supply and demand conditions are common to all market structures, including perfect competition.

Typical Evidence for the Existence of Market Power Would Be