Future Business Leaders of America (FBLA) Business Law Practice Exam

What does the term monopoly refer to in business?

1. A competitive market with many sellers

2. The exclusive control of a commodity or service

3. A partnership that includes multiple businesses

4. A federal regulation on pricing

The correct answer is: The exclusive control of a commodity or service

The term monopoly refers to the exclusive control of a commodity or service. This occurs when a single company or entity has significant power over the market for a particular good or service, allowing it to influence prices, supply, and competition significantly. In a monopoly, there are no close substitutes available for consumers, meaning that the monopolistic firm can set prices without concern for competitive pressures, often leading to higher prices and reduced output compared to a competitive market. Understanding monopolies is crucial because they can lead to market inefficiencies and a lack of choice for consumers. This contrasts sharply with a competitive market, where many sellers exist, and partnership arrangements typically involve collaboration among multiple businesses to achieve common goals. Also, monopoly is not related to federal regulations on pricing; rather, it often triggers regulatory responses to prevent market abuse and protect consumer interests.