Explain the concept of market power. Why does a monopolist have market power while a perfectly competitive firm does not?

Market power refers to the latitude that sellers have in determining the price and quantity of goods sold.

• A Monopolist has market power because it is the only seller in the market and thus faces no competition. As long as there is demand for the product, the monopolist can select the selling price based on its profitability targets.
• The perfectly competitive firm does not have any market power because there is very strong competition from other sellers: If a firm would increase their price, consumers would simply go to a competing firm and obtain the same product at the usual market price.