Economics Perfect Competition Questions Medium
Monopoly and market power are closely related concepts in economics. Market power refers to the ability of a firm or a group of firms to influence the market price or quantity of a good or service. It is the extent to which a firm can act independently of competitive forces in the market.
A monopoly, on the other hand, is a market structure where there is only one seller or producer of a particular good or service. In a monopoly, the firm has complete market power as it is the sole provider and faces no competition.
Therefore, the relationship between monopoly and market power is that a monopoly possesses the highest level of market power. It has the ability to control the market price, restrict output, and make decisions without considering the competitive forces that exist in a perfectly competitive market.
In contrast, in a perfectly competitive market, there are many buyers and sellers, and no single firm has market power. Each firm is a price taker, meaning they have to accept the market price determined by the forces of supply and demand.
Overall, monopoly and market power are interconnected, with a monopoly representing the extreme end of the market power spectrum.