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What Market Power Means
- Market power is the ability to raise prices without losing many sales to rivals.
- In perfect competition sellers are price takers and cannot charge above the market price.
Daraprim Price Spike Example
- Martin Shkreli dramatically raised daraprim's price from $13.50 to $750 per tablet.
- His company had a monopoly so he could raise price knowing few alternatives existed.
The Middle Ground Of Markets
- Most firms sit between perfect competition and monopoly with some market power.
- That power lets them price above marginal cost but forces a trade-off between margin and quantity sold.