One defining characteristic of pure monopoly is that the:

• A. firm faces a perfectly elastic demand curve
• B. market has many sellers competing for consumers
• C. firm can freely enter and exit the market
• D. firm is the sole seller of a product with no close substitutes

Answer: (D)

Verified step by step guidance

1. Understand the concept of a pure monopoly: it is a market structure where a single firm is the sole seller of a product with no close substitutes.
2. Recall the characteristics of demand curves in different market structures: a perfectly elastic demand curve implies many sellers and perfect competition, which does not apply to a monopoly.
3. Recognize that in a monopoly, the firm faces the entire market demand curve, which is typically downward sloping, not perfectly elastic.
4. Note that free entry and exit of firms is a feature of competitive markets, not monopolies, where barriers to entry exist.
5. Conclude that the defining characteristic of a pure monopoly is that the firm is the sole seller of a product with no close substitutes, distinguishing it from other market structures.