Choose the sources of market power for a monopoly from the following options. (multiple correct answers may be possible)

Question

BlackTom AI · Accepted Answer

The prompt asks us to identify sources of market power for a monopoly from the given options, noting that more than one answer may be correct.
Option a: Absence of substitutes to the monopoly’s good. This is a classic source of market power. When there are no close substitutes, customers cannot easily switch to alternative products, allowing the monopolist to set prices more freely and exercise greater control over quantity and output. This strengthens monopoly power.
Option b: Market entry barriers. High barriers to entry prevent other firms from entering the market and eroding the monopoly’s profits. Barriers such as control of essential resources, economies of scale, legal restrictions, or strong brand loyalty help sustain the monopoly’s market power by limiting competition.
Option c: Consumers have low income. While low income can influence demand and pricing effects, it does not inherently create market power for a monopoly. Market power is about the ability to influence price and output, not the level of consumer purchasing power. Low income affects welfare and demand elasticity, but it is not a primary source of the monopoly’s power itself.
Option d: Consumers have full information about the market. Having full information generally reduces information asymmetry and can enhance competition, making it harder for a monopolist to exploit consumers. In many theories, better information lowers monopoly power rather than creates it. Therefore, full information about the market is not a source of monopoly power; if anything, it challenges or mitigates it.
In summary, the statements that correctly identify sources of monopoly market power are those that describe the structural conditions enabling the monopoly to exert price and output control: absence of substitutes (a) and market entry barriers (b). The remaining statements describe factors that do not constitute sources of market power (c and d).

SESS0007_24-25 LSA Test

Choose the sources of market power for a monopoly from the following options. (multiple correct answers may be possible)

View Explanation

Log in for full answers

Similar Questions

Which type of firm has the most market power?

Question at position 63 Who had market power before national advertising?wholesalersshop keepersthe governmentmanufacturersconsumers

Question at position 62 Who had market power after national advertising?wholesalersconsumersthe governmentshop keepersmanufacturers

.Which of the following firms is most likely to have market power? a. a grocery store in a metropolitan area b. a convenience store in a suburb c. a pub in a college town d. the only gasoline station in a rural area

A profit-maximising firm with market power is most likely to use that market power to

A profit-maximising firm with market power is most likely to use that market power to

A profit-maximising firm with market power is most likely to use that market power to

A profit-maximising firm with market power is most likely to use that market power to

More Practical Tools for International Students

Homework AI Solver

Stylized Writing Assistant

Plagiarism Checker Assistant

Citation Assistant

In-Class Translation Assistant

Class Notes Assistant

Quiz Search Assistant

Past Exam Questions by School

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler