IB Economics Market Power

Introduction: What Is Market Power?

Market power refers to a firm’s ability to influence the price of a good or service. In perfectly competitive markets, this power is zero. But in monopolies and oligopolies, firms can control prices, restrict output, and earn abnormal profits.

This is a core concept in IB Microeconomics, and a key topic in Paper 1 HL, Paper 3 HL, and the Theory of the Firm unit.

Start Here: Introduction to Market Power

• Market Power Part 1: Perfect Competition and the Price-Taker Life

What is perfect competition? Why are firms called price takers? Discover market power (or lack of it) in Part 1 of our Market Power series for IB Economics HL.

IB Economics market power | Perfect competition explained | Price takers | Market structures HL

Includes:

• Definition of market power

• Contrast with perfect competition

• How market power affects price, output, and efficiency

• Market Power Part 2: How Firms Chase Profit (And What Happens When They Don’t)

Discover how firms make, lose, or just about survive on profit. Marginal cost, revenue, and the big moment when MC = MR - all in this IB Economics HL Market Power post.

IB Economics revenue and cost | Marginal cost and marginal revenue | Abnormal profit explained | Normal profit vs loss

Monopoly: Maximum Market Power

• Market Power Part 3: Monopoly – The One-Firm Show
  

What happens when one firm runs the market? Explore monopoly and natural monopoly with real-life examples in this IB Economics HL Market Power series post.

IB Economics monopoly | Natural monopoly examples | Monopoly market power | Profit maximisation HL

Includes:

• Monopoly Theory

• Welfare loss from restricted output

• Real-world examples: utilities, postal services

Oligopoly: Collusion, Price Rigidity, and Strategic Behaviour

• Market Power Part 4: Oligopoly, Collusion, and the Game Theory Mind Games
  

Oligopolies, collusion, price wars, and Game Theory - explore the strategic world of Market Power Part 4 for IB HL Economics.

IB Economics oligopoly | Game theory in economics | Price vs non-price competition | Collusive and non-collusive oligopoly

Covers:

• Kinked demand curve

• Price leadership and collusion

• Real-world examples: airlines, supermarkets, telecoms

Monopolistic Competition

• Market Power Part 5: Measuring Market Power and the Monopolistic Middle Ground

What happens between monopoly and perfect competition? Meet monopolistic competition, market concentration ratios, and the pros and cons of big firms in IB HL Economics.

IB Economics monopolistic competition | Measuring market concentration | Advantages of large firms | Government regulation monopoly

Government Intervention to Reduce Market Power

Includes:

• Maximum price controls

• Anti-trust laws

• Public ownership

Perfect for evaluation questions (AO4).

Market Power and Efficiency

Covers:

• Why monopolies often under-allocate

• Role of economies of scale

• Long-run outcomes vs short-run gain

Real-World Examples of Market Power

Google and Search Engine Dominance
Google controls over 90% of search traffic globally, raising antitrust concerns in the US and EU.
Use this in your Economics IA / EE or for regulation examples.

OPEC and Oil Market Power
OPEC countries coordinate oil output, influencing global oil prices. This is classic oligopoly behaviour with real-world inflation consequences.
Use in global economy evaluation or resource markets.

Amazon's Supply Chain Control
Amazon uses data and pricing power to dominate retail logistics and third-party sellers.
Relevant for monopoly / oligopoly hybrid case studies.

Related Topics

• IB Monopoly vs Perfect Competition

• Barriers to Entry and Long-Run Profit

• Price Discrimination in Monopolies

For access to all key diagrams, model answers, and exam strategies,

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