If a firm's demand curve in a monopolistically competitive market is shifting left:

Question

Quizplus · Accepted Answer

If the demand curve for a firm's product in a monopolistically competitive market is shifting to the left, it means that consumers are either switching to substitutes or reducing their overall demand for the product. This could happen if new competitors enter the market offering similar products or if existing competitors improve their products or prices. Therefore, the most likely reason for a leftward shift in demand is increased competition, supporting choice A. Choices B and C are incorrect because a leftward shift in demand implies lower revenue and profits for the firm, which could lead to exits or smaller economic profits. However, this does not necessarily mean that exits are occurring, or that positive profits are becoming bigger.

If a Firm's Demand Curve in a Monopolistically Competitive Market