Which of the following is a source of monopoly power?

• A. Control over a key resource
• B. Free entry and exit of firms
• C. Perfectly elastic demand curve
• D. Large number of sellers in the market

Answer: (A)

Verified step by step guidance

1. Understand the concept of monopoly power: Monopoly power refers to the ability of a firm to influence the price of a good or service in the market, typically by restricting competition.
2. Analyze each option in terms of its impact on monopoly power:
3. 1. Control over a key resource: If a firm controls a resource essential for production, it can prevent other firms from entering the market, thus gaining monopoly power.
4. 2. Free entry and exit of firms: This condition usually leads to perfect competition, reducing monopoly power because new firms can enter if profits exist.
5. 3. Perfectly elastic demand curve: This implies that the firm is a price taker with no power to influence price, so no monopoly power here.
6. 4. Large number of sellers in the market: This increases competition and reduces the chance of any single firm having monopoly power.