In which of the following situations would the supplier of an input to Andrea's Herbal Supplement Products have the greatest market power to hurt Andrea's Herbal Supplement Products?
A)The supplier is one of 200 sellers of the input in the input market.
B)Andrea's company can easily change the mix of inputs used to produce its product.
C)The supplier is the only available provider of a critical input.
D)The switching costs for Andrea's company to change input suppliers are low.

Question

Quizplus · Accepted Answer

If the supplier is the only available provider of a critical input, they have a monopoly on that input, giving them the greatest market power to hurt Andrea's Herbal Supplement Products. They can raise prices or reduce the availability of the input, potentially causing significant harm to Andrea's business. In contrast, in option A, the supplier is competing with 199 other sellers, giving them less market power. Option B suggests Andrea's company has flexibility in changing their inputs, reducing the supplier's market power. Option D implies low switching costs, meaning Andrea's company can easily change suppliers, reducing the supplier's market power.

In Which of the Following Situations Would the Supplier of an Input