Outline how imperfect competition leads to welfare loss stating the policy options open to government to rectify the situation.

Imperfect Competition and Welfare Loss: Imperfect competition refers to a market structure where firms have some degree of market power, allowing them to influence prices and output levels. In contrast to perfect competition, where many small firms compete, imperfectly competitive markets can lead to welfare loss due to various factors that limit competition and result in inefficient outcomes. These inefficiencies can lead to reduced consumer surplus, higher prices, and underutilization of resources. Let's outline how imperfect competition leads to welfare loss and explore the policy options available to the government to rectify the situation.

Factors Leading to Welfare Loss in Imperfect Competition:

1. Price Markup: Firms with market power can set prices above their marginal costs, leading to a price ____ _____ ______ ____ __________ ________ _______ _____ ____.
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