question archive Which of the following is evidence of market power? a
Which of the following is evidence of market power? a
Subject:MarketingPrice:2.88 Bought3
Which of the following is evidence of market power?
a. The firm has perfect control over price.
b. The demand curve for the firm is horizontal.
c. Output is fixed despite cost changes.
d. Optimal output is less than industry output.
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The answer is a).
A firm's market power is determined by its ability to influence market price. If a firm has perfect control over price, e.g., monopolist, then it has strong market power. In contrast, a firm in a competitive market is a price taker, and thus faces a horizontal demand curve. In this case, the firm has no market power at all.
