Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of the following best describes a monopoly?

1. A market with many sellers

2. A market with one seller

3. A market with no barriers to entry

4. A market with perfect competition

The correct answer is: A market with one seller

A monopoly is defined as a market structure where a single seller dominates the entire market for a particular good or service. This arrangement allows the monopolist to set prices, control supply, and influence market outcomes without competition. The presence of only one seller means that consumers have no alternatives if they wish to purchase the good or service offered by the monopolist. In this context, the other options highlight characteristics of different market structures. For example, a market with many sellers typically refers to perfect competition, where numerous producers compete to sell similar products, leading to price-taking behavior among them. Furthermore, a market with no barriers to entry suggests conditions conducive to competition, which contradicts the concept of a monopoly that often has significant barriers preventing other firms from entering the market. Lastly, perfect competition features many sellers and standardized products, which is the complete opposite of the monopoly scenario. Thus, the characterization of a monopoly as a market with one seller encapsulates its essence accurately.