A Level Economics AQA Practice Exam

Which is NOT characteristic of a monopoly?

1. A single producer

2. No close substitutes

3. Many firms with price-setting powers

4. Barriers to entry

The correct answer is: Many firms with price-setting powers

A monopoly is defined by several distinct characteristics that set it apart from other market structures. One of the key features of a monopoly is the presence of a single producer that dominates the market. This means there is only one firm providing a particular good or service, allowing it to exert significant control over the price and quantity supplied. Another characteristic is the absence of close substitutes for the product offered by the monopoly. This lack of alternatives means that consumers have no other comparable options, which strengthens the monopolist's power over market pricing. Barriers to entry are also a significant feature of monopolies, as they prevent other firms from entering the market and competing. These barriers can take various forms, such as legal restrictions, high start-up costs, or control over essential resources. In contrast, the presence of many firms with price-setting powers does not align with the definition of a monopoly. A monopoly exists specifically when there is only one firm in the market with the ability to set prices and dictate terms without competition. Multiple firms with price-setting powers suggest a competitive market structure, such as an oligopoly or monopolistic competition, rather than a monopoly. This understanding is crucial for distinguishing between market types in economics.