A necessary condition for market power to exist for a particular company in a market is that:
A) information must be understood by both buyers and sellers.
B) effective barriers to entry must exist.
C) the number of firms is over 150.
D) consumers perceive all products as homogeneous.

Question

Quizplus · Accepted Answer

Effective barriers to entry prevent or make it difficult for new firms to enter the market and compete with the established firms. This lack of competition allows the firms to have the ability to control prices and have market power. Therefore, the existence of effective barriers to entry is a necessary condition for market power to exist.

A Necessary Condition for Market Power to Exist for a Particular