In order to capture more surplus, the firm must have some market power.

Question

Quizplus · Accepted Answer

Market power allows the firm to have some control over the price of their product or service, which means they can capture more surplus by setting prices higher than their production costs. Without market power, the firm would have to sell at a competitive price, which could result in lower surplus. Market power allows the firm to set prices higher than marginal cost, capturing more surplus for themselves. In a perfectly competitive market, firms have no market power and must accept the market price determined by supply and demand, limiting their ability to capture surplus.

In Order to Capture More Surplus, the Firm Must Have