The demand curve facing a monopolistically competitive firm is generally
A)steeper than the demand curve that would face a perfectly competitive firm in the same industry.
B)less elastic than the demand curve that would face a monopoly in the same industry.
C)steeper and more elastic than the demand curve that would face a perfectly competitive firm in the same industry.
D)flatter than the demand curve that would face a monopoly in the same industry.

Question

Quizplus · Accepted Answer

The demand curve facing a monopolistically competitive firm is flatter than the demand curve that would face a monopoly in the same industry. This is because monopolistically competitive firms face competition from close substitutes, which means that consumers have more options and are more price-sensitive. As a result, the demand curve for a monopolistically competitive firm is more elastic than the demand curve for a monopoly.

The Demand Curve Facing a Monopolistically Competitive Firm Is Generally