Multiple Choice
Refer to Figure 16-2. In a monopolistically competitive market, at what price will the firm charge for its product?
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12. Monopoly
Characteristics of Monopoly
Multiple Choice
Which of the following is the most accurate description of a monopolist?
A
A single seller that controls the entire market for a good or service and faces the market demand curve.
B
A firm that competes with many other sellers and has no control over market price.
C
A seller that produces identical products as other firms in the market.
D
A firm that can freely enter and exit the market without barriers.
Verified step by step guidance1
Understand the definition of a monopolist: A monopolist is a single seller in a market who controls the entire supply of a good or service, meaning there are no close substitutes available.
Recognize that a monopolist faces the entire market demand curve because it is the only supplier, so it can influence the price by adjusting the quantity it produces.
Contrast this with firms in perfectly competitive markets, which are price takers and cannot influence the market price because many sellers offer identical products.
Note that in perfect competition, firms can freely enter and exit the market, which is not the case for a monopolist due to barriers to entry that protect its market power.
Conclude that the most accurate description of a monopolist is: 'A single seller that controls the entire market for a good or service and faces the market demand curve.'
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