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Fact 13.1.1
The following statements give some information about seven markets.
1. Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase its market share.
2. A single firm, protected by a barrier to entry, produces a personal service that has no close substitutes.
3. A barrier to entry exists, but the good has some close substitutes.
4. A firm offers discounts to students and seniors.
5. A firm can sell any quantity it chooses at the going price.
6. The government issues Nike an exclusive licence to produce golf balls.
7. A firm experiences economies of scale even when it produces the quantity that meets the entire market demand.
-Refer to Fact 13.1.1. A monopoly might arise in the market described in
A)statement 5.
B)statement 1.
C)statements 2, 6, and 7.
D)statement 3.
E)statement 4.

Question

Quizplus · Accepted Answer

A monopoly can arise in markets where there are barriers to entry, which is described in statements 2, 6, and 7. Statement 2 describes a market with no close substitutes, statement 6 describes a market with an exclusive license, and statement 7 describes a market with economies of scale. None of the other statements provide sufficient information to suggest that a monopoly could arise.

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