Competition vs market power

Market power is a seller's ability to set its own price rather than accept the market's. Under perfect competition, many firms sell the same thing and none can influence the price — each is a price-taker, and competition pushes the price down to the cost of making one more unit, an efficient outcome. A monopoly is the opposite: a single seller with no close rivals, free to choose its price. Because a monopolist faces the whole demand curve, selling more means lowering the price on everything, so it deliberately holds output below the competitive level and charges more. The result is a transfer from buyers to the seller and, crucially, deadweight loss — mutually beneficial trades that simply don't happen because the price sits above cost. That lost value, not just the higher price, is why economists worry about market power and why competition policy exists to limit it.