Market Power
MC firms have some degree of market power. Market power means that the firm has control over the terms and conditions of exchange. An MC firm can raise it prices without losing all its customers. The firm can also lower prices without triggering a potentially ruinous price war with competitors. The source of an MC firm's market power is not barriers to entry since they are low. Rather, an MC firm has market power because it has relatively few competitors, those competitors do not engage in strategic decision making and the firms sells differentiated product. Market power also means that an MC firm faces a downward sloping demand curve. The demand curve is highly elastic although not "flat".
Read more about this topic: Monopolistic Competition
Famous quotes containing the words market and/or power:
“To market ‘tis our destiny to go.”
—Robert Frost (1874–1963)
“There is a Restlessness springing from the consciousness of power not fully utilized, which must be present wherever there is unused power of whatever kind. This is the restlessness of the germ within the seed, struggling upward and downward towards its proper life. ... it is a striving full of pain, the cutting of tender flesh by the fetters of the captive as he struggles against their pitilessness.”
—Anna C. Brackett (1836–1911)