The monopolistically competitive seller's demand curve will tend to become more elastic the:
A)smaller the number of sellers.
B)greater the degree of product differentiation.
C)larger the number of close competitors.
D)more significant the barriers to entering an industry.

Question

Quizplus · Accepted Answer

The larger the number of close competitors, the more substitutes exist for the product, making the seller's demand curve more elastic. In monopolistic competition, products are differentiated, so there is some degree of market power, but close substitutes exist. Therefore, the elasticity of demand is influenced by the number of competitors offering similar products.

The Monopolistically Competitive Seller's Demand Curve Will Tend to Become