Business Degree Certification Practice Test

Which of the following is not a characteristic of a monopolistic market?

1. Many buyers and a single seller

2. Existence of substitutes available for consumers

3. Barriers to entry for new firms

4. Complete control over the price of products

The correct answer is: Existence of substitutes available for consumers

In a monopolistic market, one of the defining features is that there is typically a single seller dominating the market, which significantly affects the availability of substitutes for consumers. When a monopolist controls the market, they usually face little to no competition, meaning that consumers have limited or no alternatives to the seller's product. Therefore, the presence of available substitutes directly contradicts the fundamental nature of a monopolistic environment. Conversely, the characteristics that do define a monopolistic market include a significant degree of control over pricing by the single seller, barriers to entry that prevent new firms from entering the market, and a market structure characterized by many buyers but one seller. These elements work together to establish the monopolistic landscape, emphasizing the importance of a lack of substitutes in reinforcing the seller's market power.