A monopolistically competitive firm faces a downward-sloping demand curve because
A)it is able to control price and quantity demanded.
B)there are few substitutes for its product.
C)of product differentiation.
D)its market decisions are affected by the decisions of its rivals.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm differentiates its product in some way, such as through branding, quality, or design, in order to make it stand out from its competitors. As a result, consumers may view the product as unique or different from other options, which leads to a downward-sloping demand curve. This means that the firm can increase its price slightly without losing all of its customers, though it still faces competition from other firms with similar products.

A Monopolistically Competitive Firm Faces a Downward-Sloping Demand Curve Because