Government regulations that prevent two firms from merging to become a monopoly address market power.
Market power refers to the potential of a firm (or group of firms) to raise and maintain prices above a competitive level. The exercise of market power leads to loss of production and loss of economic welfare. For a company to utilize market power, there must be stable demand for its products. This means that there is a continuing need for the product regardless of the price of the product.
The factual or implicit exercise of market power is used to determine whether competition is, or could be, significantly reduced. Enterprises that exercise market power help goods from entering the hands of individuals whose value equals or exceeds the cost of product.
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