A monopolistically competitive firm has a downward-sloping demand curve because
A)market demand is downward-sloping.
B)it is a monopoly in a small segment of the market.
C)there are so few firms producing in the market.
D)competition is being eliminated in a monopolistic market.
E)its product is differentiated from others.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm differentiates its product from others, which creates a unique brand identity and allows the firm to charge a higher price than its competitors. This differentiation makes the demand for the firm's product somewhat independent of the prices of other firms in the market, and thus the firm's demand curve is downward-sloping.

A Monopolistically Competitive Firm Has a Downward-Sloping Demand Curve Because