Business Degree Certification Practice Test

What is one characteristic of a monopoly market structure?

1. Many competitors exist

2. Single seller dominates

3. Few barriers to entry

4. Homogeneous products are sold

The correct answer is: Single seller dominates

In a monopoly market structure, a single seller dominates the market. This characteristic is fundamental because it distinguishes a monopoly from other market structures, such as perfect competition or oligopoly, where multiple sellers exist. The presence of one seller means that this entity has significant control over the price of the product or service offered, as there are no direct competitors to provide alternatives for consumers. This dominance can lead to pricing power, allowing the monopolist to set prices higher than in competitive markets, which can result in reduced consumer welfare and potentially less innovative practices due to the lack of competitive pressure. This unique feature of having a sole seller impacts how the market operates, including supply, pricing strategies, and overall economic dynamics. Other characteristics presented in the options do not align with the definition of a monopoly: many competitors refer to a competitive market, few barriers to entry suggest limited market control which is not a hallmark of monopoly, and homogeneous products generally apply to perfect competition where many firms offer identical products.