A profit-maximising firm with market power is most likely to use that market power to

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BlackTom AI · Accepted Answer

The question asks about how a profit-maximising firm with market power tends to use that power. 
Option A: 'improve the allocation of resources' would be a broader social objective rather than a typical goal of a monopolist or firm with market power. In many cases, such firms may distort allocation to maximise profits rather than improve overall efficiency, so this is not the primary use of market power. 
Option B: 'charge customers for its negative externalities in production' would involve internalizing externalities, which is usually achieved through regulation or Pigouvian taxes/subsidies, not something a profit-maximising firm with market power typically enforces on its own. The firm’s pricing decisions focus on its own demand and marginal revenue, not externality pricing as a voluntary tool. 
Option C: 'increase the elasticity of its supply curve' is economically inconsistent. A firm cannot directly make its own supply more elastic by its pricing power alone; elasticity of supply is determined by production technology, costs, and time-frame. Monopolists face a downward-sloping demand and have some control over price, not over the fundamental elasticity of supply in a way that would be beneficial to profit. 
Option D: 'charge higher prices than firms with little market power' aligns with the core idea of market power: the ability to set or push above the competitive price, extracting higher rents because they face reduced or imperfect competition. This makes sense as the typical strategic use of market power to increase profits. 
Thus, Option D captures the central consequence of market power in a profit-maximising firm, while the other options describe outcomes or mechanisms that do not best reflect how market power is typically exploited in practice.

A profit-maximising firm with market power is most likely to use that market power to

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