Using a sample of 585 U. S. firms over a period of 18 years from 1994 to 2011 and utilizing financial and stock-market data from Research Insight, this study tested the relationship between market power or product differentiation and capital structure (debt-versus-equity choice) by two way fixed effects time series cross sectional regression method; it also addressed the related proposed non-linear relation between market power and profitability of U. S. firms. Our results show a statistically significant cubic relation between two measures of Tobins Q (market power,) namely product structure and two measures of capital structure, namely long-term debt to total assets and total debt to total assets. We also find a significant negative relation between debt ratios and lower levels of profitability, and positive relation between the two at higher levels of profitability. Further, we find a significantly positive relation between the growth rate of total assets and capital structure. Also, the relation between the natural logarithm of the number of shares and capital structure measures is positive. With regard to tangible fixed assets, we find support mostly for the trade-off hypothesis in that firms with higher fixed assets are able to use them as collateral to borrow more.