The fact that firms in monopolistically competitive markets differentiate their product from other sellers means that the average revenue curve each seller faces is:

Question

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The fact that firms in monopolistically competitive markets differentiate their product means that they have some market power, but not complete control like a monopoly. Therefore, they face a downward-sloping demand curve, which means that they have to lower the price of their product to sell more units. This implies that the average revenue curve each seller faces is also downward-sloping, as it represents the revenue earned per unit of output sold. Option A is incorrect because a horizontal curve would mean that the seller can sell all the output it wants at a fixed price, implying perfect competition. Option B is incorrect because a vertical curve would mean that the seller can only sell one unit at a fixed price, implying a monopoly. Option D is also incorrect because marginal revenue curve is always lower than the average revenue curve in a downward-sloping demand curve scenario.

The Fact That Firms in Monopolistically Competitive Markets Differentiate Their