Firm X is a single seller of good X. There are, however, two substitutes for good X. Given this, firm X
A)cannot be a monopolist because the theory of monopoly assumes there are no substitutes for the good the single seller sells.
B)may be a monopolist because the two substitutes may be close substitutes.
C)cannot be a monopolist because if substitutes exist for the good it produces, its demand curve is horizontal but monopolists face downward-sloping demand curves.
D)must be selling its product in a perfectly competitive market.

Question

Quizplus · Accepted Answer

Monopoly exists when there is a single seller of a good or service with no close substitutes. However, if there are substitutes, the firm can still be considered a monopolist if those substitutes are not significant enough to pose a threat to the firm's market power. Therefore, choice B is correct.

Firm X Is a Single Seller of Good X