Chapter 22: Problem 1

Which statement is true? (LO1) a) All monopolists' products have close substitutes. b) Most firms in the United States are monopolies. c) There are no monopolies in the United States. d) A monopoly is a firm that produces all the output in an industry. e) None of these statements is true.

Short Answer

Expert verified

The correct statement is (d) "A monopoly is a firm that produces all the output in an industry."

Step by step solution

Analyze Statement (a)

"All monopolists' products have close substitutes." This statement contradicts the definition of a monopoly. A monopoly's product has no close substitutes in the market. Therefore, statement (a) is false.

Analyze Statement (b)

"Most firms in the United States are monopolies." This statement is not true since the majority of firms in the United States operate in a competitive market structure, such as perfect competition or imperfect competition (oligopoly and monopolistic competition). Therefore, statement (b) is false.

Analyze Statement (c)

"There are no monopolies in the United States." Although monopolies are scarce, there are some instances where a firm has a monopoly in a particular market due to patents, government licenses, control over a crucial resource, or natural monopoly (e.g., utility companies). Therefore, statement (c) is false.

Analyze Statement (d)

"A monopoly is a firm that produces all the output in an industry." This statement is true - In a pure monopoly, a single firm produces the entirety of the output in an industry, due to barriers to entry preventing other firms from competing. Thus, statement (d) is true.

Conclusion

Since statement (d) "A monopoly is a firm that produces all the output in an industry." was found to be true, the answer for this exercise is option (d).