A firm which is the only supplier in an industry is dominating the market through its market power. With the help of a diagram examine how such action would lead to market failure.

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Perfect Competition

It is the structure of the market that is said to exist when with many buyers and sellers exchanging similar commodities and its price is fixed by the market forces, demand, and supply, and a single firm cannot cause an impact over the price or market value of the homogenous product. This structure of the market is called perfect competition.