Question

19. Market power in the United States causes a huge loss of economic efficiency.

True

False

Answer 1

True

The use of market power causes wealth transfer and loss of efficiency. The US regardless of having an extensive antitrust institution has a market power problem.

When say a monopolist sets a market price high, there is a wealth transfer from consumers to sellers and there is also a deadweight loss since some consumers whose utility is more than the monopolist's cost would rather not buy the product given its high price. In the US, there are too few firms holding too much market power. Telecoms, cable providers, airlines, and technology platforms, a few firms now dominate 75–90 percent of the market, if not more.