ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In a oligopoly
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In a monopoly
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In a perfect competition market
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In monopolistic competition
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Detailed explanation-1: -In markets with perfect or near-perfect competition, producers have little pricing power and so must be price-takers. In monopolistic or oligopolistic markets, producers have far more market power.
Detailed explanation-2: -Pure Monopoly This firm is the sole producer of a product, and there are no close substitutes. Because there are no alternatives, the firm has the highest level of market power. Hence, monopolists often reduce output, increase prices and earn more profit. Entry or exit is blocked in a pure monopoly.
Detailed explanation-3: -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-4: -A monopolistic market is a market structure with the characteristics of a pure monopoly. A monopoly exists when one supplier provides a particular good or service to many consumers.