Ch 4 Market power and dominant firms Market power-the ability of a firm to profitably raise prices above marginal cost Sources of market power: maintenance of market power requires barriers that prohibit or restrict entry of new firms A dominant firm with a competitive fringe: 2 factors that might limit the ability of a dominant firm to exercise market power are a competitive fringe and the impact of product durability Durable goods monopoly Market power: a second look Benefits of monopol SummarCh.4 Market power and dominant firms • Market power-the ability of a firm to profitably raise prices above marginal cost. • Sources of market power: maintenance of market power requires barriers that prohibit or restrict entry of new firms. • A dominant firm with a competitive fringe: 2 factors that might limit the ability of a dominant firm to exercise market power are a competitive fringe and the impact of product durability. • Durable goods monopoly • Market power: a second look • Benefits of monopoly • Summary