To define a monopoly, we cite the following characteristics:

(i) The firm is the sole seller of its product.

(ii) The firm's product does not have close substitutes.

(iii) The firm generates a large economic profit.

(iv) The firm is located in a small geographic market.

a. (i) and (ii),

b. (i) and (iii),

c. (ii) and (iv),

d. All of the above are correct.

• The correct answer is a. (i) and (ii).

A monopoly is one of the most known market structures. A market can be categorized as a monopoly if it has the following 4 main characteristics: there is only one seller in the market, the products or services sold by the firm do not have close substitutes, the barriers to entry the market are very high and the firm is a price maker. Based on this, the correct answer is option a. Option b. is incorrect because a monopoly can earn positive economic profits; however, they are not always large since that depends on the industry demand. Option c. is also incorrect because a monopoly can be also located in medium and big geographic markets.