A monopolistically competitive firm has a downward-sloping demand curve for its product,primarily because:
A)there are no barriers to entry or exit in the long run.
B)there are many sellers in the industry.
C)its product is differentiated.
D)the price is greater than the marginal revenue.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms have differentiated products, which means they can charge slightly higher prices than their competitors. This leads to a downward-sloping demand curve, as consumers are willing to pay different prices for different products. Choices A and B do not explain why there is a downward-sloping demand curve. Choice D is incorrect, as the marginal revenue curve will always be below the demand curve for a monopolistically competitive firm.

A Monopolistically Competitive Firm Has a Downward-Sloping Demand Curve for Its