Question:
Which of the following statements about firms in different types of market is false?
Which of the following statements about firms in different types of market is false?
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A monopoly is defined by its market share (being the sole seller with 100% market share) rather than its absolute physical or financial size.
Updated On: Jul 24, 2026
- A perfect competitor has no influence over the price of its product
- A monopolistic competitor may engage in non-price competition.
- An oligopolist may monitor the prices and products of all the other firms in its market.
- A monopolist must be a large firm.
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The Correct Option is D
Solution and Explanation
Step 1: Understanding the Concept:
Market structures are classified into perfect competition, monopolistic competition, oligopoly, and monopoly based on the number of firms, product differentiation, barriers to entry, and control over prices.
Step 2: Detailed Explanation:
Let us analyze each statement to determine its truth value:
- Statement A: In a perfectly competitive market, there are many small firms selling homogeneous products.
Each firm is a "price taker" and has zero power to influence the market price.
Thus, Statement A is true.
- Statement B: Under monopolistic competition, products are highly differentiated.
Firms engage heavily in non-price competition, such as advertising, branding, and customer service, to attract buyers.
Thus, Statement B is true.
- Statement C: Oligopolistic markets are dominated by a few large, mutually interdependent firms.
These firms closely monitor the pricing strategies and product changes of their competitors to maintain market share.
Thus, Statement C is true.
- Statement D: A monopoly is defined as a market structure where there is a single seller of a product with no close substitutes.
The definition does not specify the physical size of the firm.
A monopolist can be a very small firm (for example, a single utility provider or grocery store in a remote village).
Thus, Statement D is false.
Step 3: Final Answer:
The false statement is: "A monopolist must be a large firm" (Option D).
Market structures are classified into perfect competition, monopolistic competition, oligopoly, and monopoly based on the number of firms, product differentiation, barriers to entry, and control over prices.
Step 2: Detailed Explanation:
Let us analyze each statement to determine its truth value:
- Statement A: In a perfectly competitive market, there are many small firms selling homogeneous products.
Each firm is a "price taker" and has zero power to influence the market price.
Thus, Statement A is true.
- Statement B: Under monopolistic competition, products are highly differentiated.
Firms engage heavily in non-price competition, such as advertising, branding, and customer service, to attract buyers.
Thus, Statement B is true.
- Statement C: Oligopolistic markets are dominated by a few large, mutually interdependent firms.
These firms closely monitor the pricing strategies and product changes of their competitors to maintain market share.
Thus, Statement C is true.
- Statement D: A monopoly is defined as a market structure where there is a single seller of a product with no close substitutes.
The definition does not specify the physical size of the firm.
A monopolist can be a very small firm (for example, a single utility provider or grocery store in a remote village).
Thus, Statement D is false.
Step 3: Final Answer:
The false statement is: "A monopolist must be a large firm" (Option D).
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