Since a firm in a monopolistically competitive market faces a:

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A firm in a monopolistically competitive market faces a downward-sloping demand curve, indicating that it has some market power to set its own price above marginal cost. However, because there are many close substitutes available, the firm's demand curve is still relatively elastic. This means that if the firm were to raise its price too high, consumers would switch to a close substitute, resulting in a large decrease in quantity demanded. As a result, the firm will not be able to sell as much output as it would like at the higher price, and will therefore operate at less than the efficient scale of production, or at excess capacity.

Since a Firm in a Monopolistically Competitive Market Faces A