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What is market power?

Last updated 19 Aug 2020

The concept of market power is explored in this short revision video.

Market power is the ability of a business to set their prices above a level that would exist in a highly competitive market.

Higher prices then allow a firm with market power to earn higher supernormal profits.

Market power then allows firms to maintain their profits by using barriers to entry to successfully prevent the profitable entry of new firms.

If only a few firms have considerable market power, then a market can be described as an oligopoly.

In this situation, power is said to be highly concentrated.

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