ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the firm can change the market price by changing the output, then it has market power. The firms affect the prices by their output production and thus are known as price makers.

Detailed explanation-2: -Market power is also called monopoly power. A competitive firm is a “price taker.” Thus, a competitive firm has no ability to change the price of a good. Each competitive firm is small relative to the market, so has no influence on price. On the other hand, firms with market power are also called “price makers.”

Detailed explanation-3: -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-4: -Economists use both ‘market power’ and ‘monopoly power’ to refer to the power of a single firm or group of firms to price profitably above marginal cost. [FN37] Less technically, the terms both refer to the ability to price above competitive levels.

Detailed explanation-5: -Monopolistic firms have much more market power than monopolistically competitive markets since there is a single seller in the monopolistic market.