Question

Perfect monopoly as a single - firm industry where __________________.

• A. The cross-elasticity of demand between the product of the firm and that of other commodities in the market is zero
• B. The cross-elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero
• C. The income elasticity bf demand between the product of the firm and that of other commodities in the market is zero
• D. The price elasticity of demand between the product of the firm and that of other- commodities in the market is zero

Answer 1

The correct option is A The cross-elasticity of demand between the product of the firm and that of other commodities in the market is zero

Monopoly refers to a firm which has a product without any substitute in the market. Therefore, for all practical purposes, it is a single-firm industry. Under pure monopoly, there is a single seller in the market with no competitor. Hence, the cross-elasticity of demand between the product of the firm and that of other commodities in the market is zero.

Hence, A is the correct option.