When companies exercise market power, _____ occurs. _____ can solve this problem.
A)overproduction; Price competition
B)underproduction; Price discrimination
C)high costs; Price competition
D)high levels of competition; Price discrimination

Question

Quizplus · Accepted Answer

When companies exercise market power, they have the ability to restrict output and charge higher prices, leading to underproduction. Price discrimination can solve this problem by allowing firms to charge different prices to different consumers based on their willingness to pay, which can increase profits while also ensuring that more consumers are able to purchase the product.

When Companies Exercise Market Power, _____ Occurs