Question

In Monopoly market situation

• A. There is competition between firms
• B. Absence of competition
• C. Product is heterogeneous
• D. Cross elasticity of demand for the product is very high

Hint:

Remember the literal translation:
"Mono" means single, and "Poly" means seller. A single seller means there are no competitors, resulting in an absence of competition.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
A monopoly is a market structure characterized by a single seller or producer of a commodity that has no close substitutes.
Analyzing the level of competition, product characteristics, and elasticity of demand helps distinguish a monopoly from other market structures like perfect competition or monopolistic competition.

Step 2: Detailed Explanation:
Let us evaluate the characteristics of a monopoly market:
1. Single Seller:
In a monopoly, there is only one firm producing and selling the product.
Because there are no other firms in the market, there is a complete absence of competition (Option B).
Therefore, this statement is correct.
2. No Close Substitutes:
The product sold by a monopolist has no close substitutes.
Because there are no similar competing products, the cross-elasticity of demand between the monopolist's product and any other product is zero or very low (not very high, Option D).
3. Barriers to Entry:
Strong legal, natural, or institutional barriers prevent new firms from entering the market, maintaining the absence of competition.
4. Homogeneous vs Heterogeneous Product:
Product differentiation (heterogeneity, Option C) is a characteristic of monopolistic competition, where many firms sell similar but slightly different products, which is not applicable to a monopoly.

Step 3: Final Answer:
A monopoly market is characterized by a single seller, resulting in a complete absence of competition.
Therefore, the correct option is (B).