What does market power refer to?

Market power refers to a producer's ability to influence the price of a good or service in the marketplace by altering its production levels. When a firm possesses market power, it can change the price by restricting or increasing supply; for instance, if a company reduces the quantity of a product available in the market, it may cause prices to rise due to decreased supply. Conversely, if it increases production, prices may fall due to higher supply. This ability to impact prices is a hallmark of market power, distinguishing firms with more control from those in perfectly competitive markets, where individual firms have little to no influence on price.

The other options correctly highlight aspects that are not the main definition of market power. The authority of regulators pertains to the level of governmental oversight rather than the ability of a producer to influence market prices. Complete control of a market would imply a monopoly, which is a specific type of market power but does not capture the broader concept. Likewise, the idea of equal influence among all firms describes a perfectly competitive environment, where no single entity can influence prices, contrary to the essence of market power.