Question: Suppose a friend is taking an economics course at another college or university and his professor uses a different textbook. Your friend, after learning about

Suppose a friend is taking an economics course at another college or university and his professor uses a different textbook. Your friend, after learning about monopolies and the lost gains from trade that result from monopolies, becomes very agitated about firms with market power, and he makes this statement: “It should be strictly forbidden for any company, in any market, to have more than 50% market share—market power like this always leads to higher prices, deadweight loss and inefficiency!” After you calm him down, how would you respond to this statement? Is your friend right?

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No your friend is not entirely right In many cases it works just as he says Market power leads to hi... View full answer

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