Which of the following is a key characteristic that distinguishes a monopoly from a perfectly competitive market?

• A. In a monopoly, there are many sellers offering identical products.
• B. A monopoly cannot influence the price of its product.
• C. A monopoly has significant barriers to entry, preventing other firms from entering the market.
• D. A monopoly faces a perfectly elastic demand curve for its product.

Answer: (C)

Verified step by step guidance

1. Understand the defining features of a monopoly and a perfectly competitive market. A monopoly is a market structure where a single firm is the sole seller of a product with no close substitutes, while a perfectly competitive market has many sellers offering identical products.
2. Recall that in a perfectly competitive market, firms are price takers, meaning they cannot influence the market price and face a perfectly elastic demand curve. In contrast, a monopoly has some control over the price because it is the only seller.
3. Identify the role of barriers to entry: In a monopoly, significant barriers prevent other firms from entering the market, which maintains the monopolist's market power. In perfect competition, there are no such barriers, allowing free entry and exit.
4. Evaluate the given options by comparing them to these characteristics: For example, 'many sellers offering identical products' describes perfect competition, not monopoly; 'monopoly cannot influence price' is incorrect because monopolies do have price-setting power; 'perfectly elastic demand curve' applies to perfect competition, not monopoly.
5. Conclude that the key distinguishing characteristic of a monopoly is the presence of significant barriers to entry that prevent other firms from entering the market, which allows the monopolist to maintain market power.