Which of the following is characteristic of a monopolistically competitive firm?
A) The firm faces an upward-sloping demand curve.
B) The firm faces an inelastic demand curve.
C) The firm faces a horizontal demand curve.
D) The firm produces a differentiated product.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm produces differentiated products, meaning that there are close substitutes but they are not identical. This allows the firm to have some control over its price and face a downward-sloping demand curve, but it is not perfectly elastic like in a perfectly competitive market. Therefore, options A, B, and C are not characteristic of a monopolistically competitive firm.

Which of the Following Is Characteristic of a Monopolistically Competitive