From the textbook "The Agricultural Marketing System": What kind of market power is possessed by a...

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From the textbook "The Agricultural Marketing System": What kind of market power is possessed by a...

From the textbook "The Agricultural Marketing System":

What kind of market power is possessed by a firm that has a highly differentiated product?

business economics

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Answer 1

Answer #1

Monopolistic competition.

Market power is defined as the power of a firm to influence the market price of its product.

Monopolistic competition is in between monopoly and perfect competition. Here they deal in highly differentiated product segment. They possess market power to influence the price of their product but the degree of market power is very low. As a large number of firms are operating in the industry.

They all are price makers but in the long run the profit is zero. The entry and exit in this market structure is easy. Thus, due to presence of large number of firms these firms has low degree of market power.

Example of monopolistic competition small Retailers, Resturants.

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Answer 2

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