Firms that operate in a monopolistically competitive industry face a downward-sloping demand curve as a result of:
A)product differentiation.
B)the relative elasticity of supply of other producers in the market.
C)collusion among firms in the industry.
D)firms producing a level of output consistent with minimum average costs in the long run.

Question

Quizplus · Accepted Answer

Firms in monopolistically competitive industries differentiate their products in order to capture a portion of the market. This differentiation creates a downward-sloping demand curve as consumers are willing to pay different prices based on their perceived differences in quality, convenience, or style.

Firms That Operate in a Monopolistically Competitive Industry Face a Downward-Sloping