The demand curve for a monopolistically competitive firm slopes downward because:
A)the demand for the product drops to zero after a slight price increase.
B)the product has close substitutes produced by competing firms.
C)there is a very little brand loyalty towards a single firm's product.
D)customers are not influenced by advertising.
E)buyers are not sensitive to changes in the price of the product.

Question

Quizplus · Accepted Answer

The demand curve for a monopolistically competitive firm slopes downward because the product has close substitutes produced by competing firms. This means that if the firm raises its price too much, consumers will switch to a similar product from a competing firm, leading to a decrease in demand for the monopolistically competitive firm's product.

The Demand Curve for a Monopolistically Competitive Firm Slopes Downward