Which of the following statements is true of a monopoly?

• A. A monopoly is the sole seller of a product with no close substitutes.
• B. In a monopoly, there are many firms competing in the market.
• C. A monopoly cannot influence the market price of its product.
• D. A monopoly faces a perfectly elastic demand curve.

Answer: (A)

Verified step by step guidance

1. Understand the definition of a monopoly: A monopoly is a market structure where there is only one seller of a product or service, and there are no close substitutes available to consumers.
2. Analyze the statement 'A monopoly is the sole seller of a product with no close substitutes.' This aligns with the definition of a monopoly, making it a true statement.
3. Consider the statement 'In a monopoly, there are many firms competing in the market.' This contradicts the definition because a monopoly has only one firm, so this statement is false.
4. Evaluate the statement 'A monopoly cannot influence the market price of its product.' Since a monopoly is the sole seller, it has significant control over the price, so this statement is false.
5. Review the statement 'A monopoly faces a perfectly elastic demand curve.' A monopoly faces a downward-sloping demand curve because it is the only seller, so this statement is false.