A monopoly is characterized by all of the following except:

• A. The firm faces a perfectly elastic demand curve.
• B. There are significant barriers to entry preventing other firms from entering the market.
• C. The firm has market power to set the price of its product.
• D. The firm is the sole seller of a product with no close substitutes.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the characteristics of a monopoly. A monopoly is a market structure where a single firm is the sole seller of a product with no close substitutes, giving it significant market power.
2. Step 2: Recall that a monopoly faces the entire market demand curve, which is typically downward sloping, meaning the firm can influence the price by adjusting the quantity supplied.
3. Step 3: Recognize that significant barriers to entry exist in a monopoly, preventing other firms from entering the market and competing.
4. Step 4: Analyze the statement 'The firm faces a perfectly elastic demand curve.' In a monopoly, this is not true because a perfectly elastic demand curve implies the firm is a price taker, which contradicts the monopoly's market power.
5. Step 5: Conclude that the statement about facing a perfectly elastic demand curve is the exception, as monopolies face a downward sloping demand curve, not a perfectly elastic one.