Multiple Choice
Monopolists are often criticized for being inefficient. What does this inefficiency refer to in the context of monopoly markets?
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12. Monopoly
Characteristics of Monopoly
Multiple Choice
Which of the following is a potential barrier to entry into a monopoly market?
A
Large number of small sellers
B
Perfectly elastic demand curve
C
Free access to technology for all firms
D
Ownership of a key resource by a single firm
Verified step by step guidance1
Understand the concept of barriers to entry: These are obstacles that prevent new firms from entering a market and competing with existing firms, especially monopolies.
Analyze each option in terms of whether it restricts new firms from entering the market:
- A large number of small sellers typically indicates a competitive market, not a barrier to entry.
- A perfectly elastic demand curve means firms are price takers, common in competitive markets, so it is not a barrier to entry.
- Free access to technology for all firms lowers entry costs, so it is not a barrier to entry.
Recognize that ownership of a key resource by a single firm restricts other firms from accessing essential inputs, creating a significant barrier to entry and enabling monopoly power.
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