Which one of the following statement is FALSE about a monopoly?

Question

BlackTom AI · Accepted Answer

Question restated: Which one of the following statements is FALSE about a monopoly?

Option 1: A monopoly usually has a market dominant position. This is generally true because a monopoly holds the largest market share, faces little or no competition, and can influence prices and output levels due to lack of close rivals. The phrasing emphasizes dominance, which aligns with typical monopoly power.

Option 2: A monopoly has strong barriers to entry. This is a core defining feature. High barriers (e.g., legal restrictions, control of a key resource, economies of scale, network effects) prevent other firms from entering and eroding the monopoly’s market power. Hence this statement is true.

Option 3: A monopoly is a price maker that maximises total economic profit in the long run. In monopoly markets, the firm faces a downward-sloping demand curve, allowing it to set price above marginal cost. Its profit-maximizing rule is where marginal revenue equals marginal cost, and if profits are positive, the long-run perspective allows for sustained economic profits through barriers that prevent entry. The statement captures the essential idea of price-setting ability and profit optimization in the long run, so it is true.

Option 4: A monopoly produces a differentiated good which has some close substitutes. This statement is misaligned with the standard monopoly concept. A true monopoly typically produces a good with no close substitutes or significant differentiation that would invite direct competition. If there were close substitutes, the market would resemble monopolistic competition or perfect competition depending on substitution strength and other factors, which undermines the monopoly position. Therefore, this statement is false.

Summary: The false statement among the options is the one asserting the product has close substitutes under a monopoly, which contradicts the defining feature of monopolistic power. The other statements align with common textbook characterizations of monopolies.

Which one of the following statement is FALSE about a monopoly?单项选择题

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