The monopolistic competitive firm faces a highly price _____ demand curve but not _____ demand curve as in perfect competition.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms face a downward-sloping, relatively elastic demand curve because while they have some monopoly power due to product differentiation, consumers can still switch to competitors' products if the price goes too high. This is unlike perfect competition, where the demand curve is perfectly elastic because products are identical, and consumers can switch at no cost.

The Monopolistic Competitive Firm Faces a Highly Price _____ Demand