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Question Description

Topic: Market Power

Write a one to two page paper, addressing the following:

a. Describe in your own words the concept of market power.

b. What are the three reasons that a market might have a Monopoly?

c. Give an examples of two monopoly Firm exercising its market power.

  1. Post the above introduction to the Class Discussion Board.
  2. Respond to the postings of two of your classmates.

THIS IS Discussion 3 FOR CLASSMATES

1)

a). Market power refers to the ability of a firm to maintain and raise price above level that would prevail under competition and this is know as market to monopoly power. The practice of this leads to reduced output and there will inequality in the economy and welfare will be lost. Market power can be said as the level of influence that a firm has on influencing or determining price of a specific product. It is often a consideration in government approval of mergers. Market price is a huge problem and basically every problem in the economy, especially the US economy is due to firms having too much power and control over the market. Market power and domination by certain firms leads to unfair trade and practices, prices will go high and consumers will be exploited, hence market power is not at all good for the economy.

b). The three reasons that a market might have a monopoly are : 1) key resource is owned by a specific or single firm, 2) government gives a specific firm the exclusive right to produce some good. 3) the costs of production makes a single producer more efficient than other large number of producers.

c) Most well know example of monopoly firm with market power is Microsoft’s share in PC operating systems. Asian Telecom is an another example.

2)

I agree with you , A natural monopoly is as stable as possible: if an artificial monopoly can split into many competing firms over time, the natural monopoly industry will remain the same for a long time. A turning point in its work can only occur with the emergence of new technological solutions or a sharp change in market demand