Market power leads to market failure because Question 9 answers price exceeds ma
ID: 1235461 • Letter: M
Question
Market power leads to market failure because
Question 9 answers
price exceeds marginal revenue, which causes the profit-maximizing firm to over-produce the good or service.
price exceeds marginal revenue, which causes the profit-maximizing firm to under-produce the good or service.
when MR = MC in profit-maximizing equilibrium, the value of the last unit produced is less than the marginal cost of producing the last unit.
firms with market power have no incentive to produce on their expansion paths.
Explanation / Answer
price exceeds marginal revenue, which causes the profit-maximizing firm to under-produce the good or service.