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

What is a business situation called when one entity controls the market for a product or service?

1. Monopoly

2. Merger

3. Cartel

4. Oligopoly

The correct answer is: Monopoly

A situation where one entity controls the market for a product or service is known as a monopoly. In this context, a monopoly exists when a single seller is the exclusive provider of a particular good or service, which means they can dictate market terms without competition. This lack of competition often leads to higher prices and fewer choices for consumers since the monopolist has significant control over the availability and pricing of the product. In contrast, a merger refers to the combination of two companies into one, which does not necessarily imply market control. A cartel involves an agreement between competing firms to control prices or limit production, maintaining some level of market competition rather than total control by a single entity. An oligopoly exists when a few firms dominate the market, which means there is still some level of competition among these entities, unlike a monopoly where one firm holds all the power. Thus, a monopoly distinctly stands apart as it represents total market control by one entity, making it the correct choice in this context.