Comment on the following statement: "A firm with market power is able to charge any price it likes."
What will be an ideal response?
The statement is false. A firm with market power is constrained by the demand for its product. The firm must charge a price that buyers are willing to pay.
You might also like to view...
If nominal interest rates have a lower bound of zero and deflation occurs at 3% (i.e., the inflation rate equals -3%, then the lowest real interest rate possible is
A) -3%. B) 0%. C) 3%. D) 6%.
Which of the following most resembles a perfectly competitive market?
A. The stock market B. The publishing industry C. The steel industry D. The new car market
The dividing line between a recession and a depression is
A. unclear. B. a ten percent rate of unemployment. C. determined by government officials. D. set by law.
To answer the question, refer to the following table showing a demand schedule: 
If price falls from $200 to $150,
A. arrows representing the price and quantity effects both point down. B. total revenue moves in the same direction as the arrow representing the price effect. C. arrows representing the price and quantity effects both point up. D. an arrow representing the price effect points down and is longer than an arrow for the quantity effect. E. an arrow representing the price effect points down and is shorter than an arrow for the quantity effect.