Which of the following is most likely to be a monopoly?

• A. A local water utility company
• B. A wheat farmer in a large agricultural market
• C. A neighborhood coffee shop
• D. A clothing retailer in a shopping mall

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the definition of a monopoly. A monopoly is a market structure where a single firm is the sole producer of a good or service with no close substitutes, and where significant barriers to entry prevent other firms from entering the market.
2. Step 2: Analyze each option based on the monopoly characteristics. Consider whether the firm is the only provider, if there are close substitutes, and if there are barriers to entry.
3. Step 3: Evaluate 'A local water utility company'. Typically, water utilities are natural monopolies because the infrastructure costs are very high, making it inefficient for multiple firms to operate. They usually have exclusive rights to supply water in a region, with no close substitutes.
4. Step 4: Evaluate 'A wheat farmer in a large agricultural market'. Wheat farmers are usually price takers in a perfectly competitive market with many sellers and identical products, so this is not a monopoly.
5. Step 5: Evaluate 'A neighborhood coffee shop' and 'A clothing retailer in a shopping mall'. Both face competition from many other shops and have close substitutes, so they are not monopolies.