The product of a monopoly firm must

A) have no close substitutes

B) have a perfectly inelastic demand

C) have a highly elastic supply

D) have an upward sloping average variable cost

E) be homogeneous

Expert Solution

A monopoly firm is a single seller because there are barriers to entry. In a pure monopoly industry, there is a single firm. The barriers to entry are those factors which lead to the restriction of entry by the new firms. These are patent laws that restrict the entry of new firms. License and copyrights are also an example of barriers to entry.

A monopolist firm is a maker and profit-maximizing condition is

MR=MC

Since there are no close substitute for the monopoly’s product, the monopoly can charge any price it wishes. This is true because there is a single seller.

The demand curve of the monopoly is highly inelastic.

Hence it can be said that the product of a monopoly firm must have no close substitutes.

Hence option A is the correct answer.

Rahul Sunny answered 2 years ago

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The product of a monopoly firm must

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