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Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. PRICE QUANTITY Demand Supply Q E For an output

Suppose that the following graph shows a free market equilibrium, with QE

as the equilibrium quantity.

PRICE

QUANTITY

Demand

Supply

Q

E

For an output level below QE

, the value of a unit to a buyer is the cost of a unit to a seller.

Suppose a firm that produces for this market is able to influence the market price, which leads to an outcome that differs from the free market equilibrium shown on the previous graph. Such a situation is characterized by , which is an example of .

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