The demand curve faced by a monopolistically competitive firm
A)is the same as the market demand curve
B)is less elastic than the one faced by firms in perfect competition
C)is perfectly elastic
D)is perfectly inelastic
E)has a constant slope

Question

Quizplus · Accepted Answer

A monopolistically competitive firm faces a downward-sloping demand curve, but it is less elastic than the one faced by firms in perfect competition. This is because in monopolistic competition, firms offer slightly differentiated products, which means that consumers have some preferences for one product over another. As a result, they are less likely to switch to a substitute product in response to a price change.

The Demand Curve Faced by a Monopolistically Competitive Firm