This is an example of…?

Ma Bell was the sole provider of landline telephone service to most of the US in 1980s.

This is an example of…?
A . Monopsony
B . Monopoly
C . Monopolistic competition
D . Perfect competition

View Answer

Answer: B

Explanation:

A monopoly exists when only one company can supply an essential product or service in a givenregion because of significant barriers to entry for any competitor. The barriers can be legal, regulatory, economic, or geographic. Ma Bell case is an example of monopoly. The company was broken up in 1982.

A monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers.

Pure or perfect competition is a theoretical market structure in which the following criteria are met:

– All firms sell an identical product (the product is a "commodity" or "homogeneous").

– All firms are price takers (they cannot influence the market price of their product).

– Market share has no influence on prices.

– Buyers have complete or "perfect" information―in the past, presentand future―about the product being sold and the prices charged by each firm.

– Resources for such a labor are perfectly mobile.

– Firms can enter or exit the market without cost.

Monopolistic competition characterizes an industry in which many firms offerproducts or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors. Monopolistic competition is closely related to the business strategy of brand differentiation

Reference: CIPS study guide page 105-110

LO 2, AC 2.2