Monopolies may be created when one firm owns an input that is difficult to duplicate and the:
A) demand for the product is elastic.
B) demand for the product is inelastic.
C) supply of the product is elastic.
D) supply of the product is inelastic.

Question

Quizplus · Accepted Answer

If the demand for the product is inelastic, then the monopolist has the ability to raise prices without losing too many customers. This is because there are no close substitutes for the product, and consumers are willing to pay a higher price to obtain it. Therefore, monopolies are more likely to arise when the demand for the product is inelastic.

Monopolies May Be Created When One Firm Owns an Input