Which of the following is an assumption made in the model of pure monopoly?

• A. Firms produce identical products.
• B. There is free entry and exit in the market.
• C. Buyers and sellers have perfect information.
• D. There is only one seller in the market.

Answer: (D)

Verified step by step guidance

1. Understand the context of the pure monopoly model: it describes a market structure where a single firm dominates the entire market.
2. Recall the key assumptions of a pure monopoly, which typically include: one seller, unique product with no close substitutes, high barriers to entry, and the firm being a price maker.
3. Analyze each option given in the problem: 'Firms produce identical products' is an assumption of perfect competition, not monopoly.
4. 'There is free entry and exit in the market' also applies to perfect competition, whereas monopoly has significant barriers to entry.
5. 'Buyers and sellers have perfect information' is another assumption of perfect competition, not monopoly. The correct assumption for monopoly is that there is only one seller in the market.