ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Market power refers to a company’s relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply, demand or both. In markets with perfect or near-perfect competition, producers have little pricing power and so must be price-takers.

Detailed explanation-2: -Market power is the ability of a company to control prices and output. Markets dominated by a few large firms tend to have higher prices and lower output than markets with many sellers.

Detailed explanation-3: -When marginal cost is higher, a firm sets a higher price. When demand is more inelastic (so a firm has more market power), the markup is higher, so a firm sets a higher price. When demand is perfectly elastic, the markup is 1, and the firm sets its price equal to marginal cost.

Detailed explanation-4: -There are four main types of market power: monopoly, perfect competition, oligopoly, and monopolistic competition. Each type has different features.