Which of the following is an essential characteristic of a monopoly?

• A. Free entry and exit of firms in the market
• B. Firms produce identical products
• C. There are many firms competing in the market
• D. A single seller controls the entire market supply of a product

Answer: (D)

Verified step by step guidance

1. Understand the definition of a monopoly: A monopoly is a market structure where a single firm is the sole seller of a product with no close substitutes.
2. Identify key characteristics of a monopoly: These include a single seller, unique product with no close substitutes, and significant barriers to entry preventing other firms from entering the market.
3. Compare the given options with the characteristics of a monopoly: Free entry and exit, many firms, and identical products are features of more competitive market structures, not a monopoly.
4. Recognize that the essential characteristic of a monopoly is that a single seller controls the entire market supply of the product, giving that firm market power.
5. Conclude that the correct answer is the option stating 'A single seller controls the entire market supply of a product' because it captures the defining feature of a monopoly.