When a firm has the power to establish its price A)P = MR. B)P = MC. C)P MR. D)P

Question

When a firm has the power to establish its price
A)P = MR.
B)P = MC.
C)P > MR.
D)P < MR.

Quizplus · Accepted Answer

When a firm has the power to establish its price, it can set the price higher than the marginal revenue (MR) it gains from selling an additional unit. This is because the firm has some degree of market power, and can thus charge a higher price without losing all of its customers. Therefore, the price (P) will be greater than the MR in this scenario.

When a Firm Has the Power to Establish Its Price