Because of the large number of firms in a monopolistically competitive market, each firm faces a horizontal demand curve.

Question

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In a monopolistically competitive market, firms face a downward-sloping demand curve as their products have some degree of differentiation, making them substitutes but not perfect substitutes. Therefore, consumers may be willing to pay different prices for similar products from different firms, resulting in a demand curve that slopes downwards.

Because of the Large Number of Firms in a Monopolistically