The price of diamonds is high,in part because the majority of the world's diamonds are controlled by a single firm.This is an example of
A)a market failure caused by an externality.
B)a market failure caused by market power.
C)a market failure caused by equality.
D)There is no market failure in this case.

Question

Quizplus · Accepted Answer

The fact that a single firm controls the majority of the world's diamonds gives them market power, which allows them to set high prices and limit supply. This is an example of a market failure caused by market power.

The Price of Diamonds Is High,in Part Because the Majority