Which market model results when there is only one supplier of a good with no substitute?

• A. Oligopoly
• B. Monopolistic competition
• C. Monopoly
• D. Perfect competition

Answer: (C)

When there is only one seller of a good and no close substitutes, the market takes a monopoly form. The single firm has significant market power because consumers cannot switch to another product, so the firm faces the entire demand for its output and can influence the price by adjusting how much it produces. This differs from other market models: an oligopoly has a few firms competing, monopolistic competition has many firms selling differentiated products, and perfect competition has many firms selling identical products where no single firm can affect the price. Barriers to entry, such as high startup costs, control of a key resource, or economies of scale, keep competing firms out, allowing the monopoly to set higher prices and produce less than would be seen in a competitive market. The lack of close substitutes means consumers have limited alternatives, which reinforces the monopolist’s pricing power and can lead to a deadweight loss to society. A common real-world example is a local utility provider that is the sole supplier in a region.