Multiple Choice
Which of the following best completes the statement: 'A pure monopoly is a price ___ engaging in non-price competition.'?
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12. Monopoly
Characteristics of Monopoly
Multiple Choice
Which of the following best describes a purely monopolistic firm?
A
It faces a perfectly elastic demand curve.
B
It is the sole seller of a product with no close substitutes.
C
It is a price taker in the market.
D
It can freely enter and exit the market without barriers.
Verified step by step guidance1
Understand the characteristics of different market structures, focusing on monopoly and perfect competition.
Recall that a purely monopolistic firm is defined as the sole seller of a product with no close substitutes, meaning it has significant market power to set prices.
Recognize that a perfectly elastic demand curve is characteristic of a perfectly competitive firm, not a monopolist, because monopolists face a downward-sloping demand curve.
Note that being a price taker applies to firms in perfect competition, where individual firms cannot influence the market price, unlike a monopolist who is a price maker.
Consider that free entry and exit without barriers is a feature of perfectly competitive markets, whereas monopolies typically have high barriers to entry preventing other firms from entering the market.
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