The output in a market with market power is
A)efficient because marginal cost is equal to marginal revenue.
B)higher than the output in a market without market power.
C)inefficient because the marginal benefit to society of extra output exceeds the marginal cost.
D)more predictable than the output in a market without market power due to product differentiation.

Question

Quizplus · Accepted Answer

In a market with market power, firms can set prices above marginal costs, leading to a situation where the marginal benefit to society of producing an additional unit (which is reflected in the price consumers are willing to pay) exceeds the marginal cost of producing that unit. This results in an inefficient allocation of resources, as not enough of the good is produced to maximize societal welfare.

The Output in a Market with Market Power Is