If a company gains market power as an input buyer, then:
A)the company may be able to purchase inputs at lower prices than other companies who use the same inputs can.
B)the company can set its product price without losing customers.
C)new entry into the industry will be more likely because inputs are available.
D)network effects will result, discouraging new entry into the market.

Question

Quizplus · Accepted Answer

When a company gains market power as an input buyer, it can negotiate lower prices from suppliers due to its large purchasing power. This gives the company a cost advantage over its competitors who have to pay higher prices for the same inputs. However, it does not necessarily mean that the company can set its product price without losing customers or that new entry into the industry will be more likely. Network effects may also play a role, but it is not a given.

If a Company Gains Market Power as an Input Buyer