Markets: 

A market makes possible the exchange of goods and services. It is a place or service that enables buyers and sellers to exchange goods and services. A market may be formally organized exchange or a loosely organized one. It may be confined to one location or it may encompass a city, state, a country, or the entire world. The purpose of markets is to facilitate the exchange of goods and services between buyers and sellers.

Market power is determined when one buyer or seller in a market is able to have a large amount of influence over the quantity of goods and services that is traded or the price at which they are sold. There are different types of market structures such as perfect competition, duopoly, oligopoly, monopoly and monopsony. Market power does not exist when there is perfect competition, but it does when there is a monopoly, monopsony or oligopoly.

When a market left to itself does not allocate resources efficiently then there is what is known as market failure. There are basically four main reasons for market failure. The main reason is the presence of a single buyer or seller in the market who is able to have considerable influence on prices and output. This happens in the case of monopoly or monopsony. Other reasons are externalities, public goods, and the possibility of incomplete or asymmetric information.

Abuse of market power can be dealt with best though antitrust policy. In a free market system it is the joint actions of individuals or firms seeking their own advantage, which make decisions about how resources are allocated, as well as about production, and consumption, price levels and competition. Government intervention is sometimes necessary to encourage or discourage demand or to promote competition to prevent the emergence of monopolies.