Question

Classify each statement according to whether or not it describes a monopoly. If a statement does not describe a monopoly. leave it unplaced. - There is only one firm in the industry - Only a few time exist in the industry, and these firms share total market power. - There are many firms in the industry - There are low barriers to entry into the market.

- Firms are price makers - No close substitutes are available - Firms are price takers
- There are significant barriers to cntry into the market

Answer 1

A monopoly is characterized by the presence of a single firm in the industry, the lack of close substitutes, the ability of the firm to set prices, and substantial barriers to entry. Statements describing these attributes identify a monopolistic market, while those describing multiple firms, low barriers to entry, and firms as price takers do not.

Step-by-step explanation:

To classify the given statements as to whether or not they describe a monopoly, we need to understand the characteristics of a monopolistic market structure.

• There is only one firm in the industry (Describes a monopoly)
• Only a few firms exist in the industry, and these firms share total market power. (Does not describe a monopoly - more likely describes an oligopoly)
• There are many firms in the industry (Does not describe a monopoly)
• There are low barriers to entry into the market (Does not describe a monopoly)
• Firms are price makers (Describes a monopoly)
• No close substitutes are available (Describes a monopoly)
• Firms are price takers (Does not describe a monopoly - this is characteristic of perfect competition)
• There are significant barriers to entry into the market (Describes a monopoly)

A monopoly exists when there is only one firm in the industry, there are no close substitutes for its products or services, it is a price maker, and there are significant barriers to entry that prevent other firms from entering the market.