Market Power Is a Form of Market Failure Because

question 16

Multiple Choice

Market power is a form of market failure because:

• A) Competition is restricted,output is reduced,and the price is higher.
• B) It involves externalities.
• C) Monopolies produce more output than is optimal.
• D) Administrative costs of compliance are high.

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Definitions:

Efficiency Loss

Refers to the loss of economic efficiency when the optimal allocation of resources is not achieved, often due to market failures or distortions.

Demand Curve

A chart that displays how the cost of a product affects the amount consumers want to buy, usually showing a decline from left to right.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of it that suppliers are willing to sell at various prices.

Perfectly Inelastic

A situation in which the quantity demanded or supplied does not change regardless of the price changes.