The demand curve of a monopolistically competitive firm
A)is horizontal because the firm must cut its price to sell more.
B)is perfectly elastic.
C)is downward-sloping because it sells an identical product.
D)is downward-sloping because it must cut its price to sell more.

Question

Quizplus · Accepted Answer

The demand curve of a monopolistically competitive firm is downward-sloping because it must cut its price to sell more. This is because the firm faces competition from other firms that sell similar but not identical products. Therefore, the firm has some market power and can control the price of its product, but it still needs to lower the price to attract more customers.

The Demand Curve of a Monopolistically Competitive Firm