The _________ demand curve for a firm operating in a monopolistically competitive market _.
A)downward-sloping; is the same as the demand curve facing a perfectly competitive firm.
B)downward-sloping; differs from the horizontal demand curve facing a perfectly competitive firm.
C)horizontal; differs from the downward-sloping demand curve facing a perfectly competitive firm.
D)horizontal; is the same as the demand curve facing a perfectly competitive firm.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm faces a downward-sloping demand curve, but it differs from the horizontal demand curve facing a perfectly competitive firm. In a monopolistically competitive market, each firm produces a slightly differentiated product, which gives them some market power to set their own price. As a result, their demand curve is downward-sloping, but not as elastic as a perfectly competitive firm's demand curve, which is perfectly elastic, or horizontal.

The _________ Demand Curve for a Firm Operating in a Monopolistically