question archive Which of the following is a characteristic of a monopoly? A) Many similar firms compete in the same market
Which of the following is a characteristic of a monopoly? A) Many similar firms compete in the same market
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Which of the following is a characteristic of a monopoly?
A) Many similar firms compete in the same market.
B) Each firm sells a small percentage of the total sold in the market.
C) The market is flooded with companies that sell essentially the same commodity-like product.
D) Companies that dominate the market can set the price by controlling the quantity produced.
E) Customers have many substitutes available and are therefore responsive to changes in price.
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The correct answer is D) Companies that dominate the market can set the price by controlling the quantity produced.
In a pure monopoly one firm has all the market power since it is the only supplier in the industry. This means that it has full control of the supply. A monopolistic firm can limit the supply in order to increase the price level and consumers cannot do anything because there are no close substitutes. As a consequence the demand is not responsive to price changes (inelastic demand). In conclusion, the correct answer is option D).
