A residual demand curve is the demand curve that describes the demand remaining for the potential entrant after the incumbent firm has set its output level.

Question

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A residual demand curve reflects the demand that remains for a product or service that has already been produced by other firms. In the case of a potential entrant, it reflects the demand that is left after the incumbent firm has already set its output level. The residual demand curve is thus a useful tool for analyzing market dynamics, competition, and potential market entry strategies.

A Residual Demand Curve Is the Demand Curve That Describes