Chapter 25, Problem 1E

To determine

To state:

Whether C Company is a monopoly, if C Company's brand sells 85% of the soup in United States.

Answer to Problem 1E

The C Company is a monopoly.

Explanation of Solution

Monopoly is a market structure where only a single seller exists. Certain distinctive features of monopoly are as follows:

1. Only a single seller exists.
2. Product is differentiated.
3. Low price elasticity of demand for own goodswhich means inelastic demand for own goods.
4. Very low cross-price elasticity of demand which means. no close substitutes exist,
5. Strong barriers to entry (natural or technical).
6. Monopolist (firm) is the price maker. industry is the price taker, and
7. Supernormal profits in the long run.

A monopolistic firm has the power to influence the price and output in the industry. As C Company has 85% of the market share, it has the power to decide the market price or major share of the industry output. Hence, it is a monopolist firm.

Economics Concept Introduction

Monopoly:

Monopoly is a market structure where there is only one seller and products are differentiated. A single firm has a larger control over the market in this kind of structure.