If a firm has market power but cannot prevent its customers from reselling the product, the firm will:
A) produce a quantity of output at which marginal revenue equals marginal cost.
B) produce a quantity of output at which price equals marginal cost.
C) engage in second-degree price discrimination.
D) engage in first-degree price discrimination.

Question

Quizplus · Accepted Answer

A firm with market power will aim to maximize its profits by producing a quantity of output where marginal revenue equals marginal cost. This principle applies regardless of the firm's ability to prevent resale.

If a Firm Has Market Power but Cannot Prevent Its