Risks of Market Power
Market Failure: Market Power
AO3·HL
Syllabus requirement
Market dominance may harm consumers via higher prices, limited output, and reduced choice.
Assessment objectives
AO3 Synthesis and Evaluation
Higher LevelThis topic is assessed at HL.
Summary
This topic explains what market power is and why it matters: when firms can influence price, output or other market conditions, competitive outcomes can be altered. The text describes risks from market power — higher prices, lower output, reduced consumer choice and possible collusion — and also notes potential benefits such as economies of scale and product improvements. Whether market power is harmful depends on market concentration, firm behaviour and the strength of actual and potential competition.
