Why is it hard for a firm to maintain market power over a Long Run?

Purpose

To assess your ability to:

1. Analyze the relationships between revenues, costs, and profits in a variety of market settings.
2. Discuss government regulations of less than competitive market structures and firms.
3. Discuss economists’ approach to evaluating potential mergers and acquisitions.
4. Evaluate the extent of a company’s market power.

Action Items

1. Write a one to two page paper, addressing the following:

1. 1. Describe in your own words the concept of market power.
   2. Provide an example of a firm exercising its market power.Referring to your example above, answer the following questions:
      • What are the sources of the firm’s market power?
      • Can they be sustained over a short run / long run?
   3. Answer the question below in your conclusion:
   • • Why is it hard for a firm to maintain market power over a Long Run?