A monopolistic competitor:
A) faces a perfectly elastic demand curve.
B) faces an elastic demand curve.
C) faces a unit elastic demand curve.
D) faces an inelastic demand curve.

Question

Quizplus · Accepted Answer

A monopolistic competitor faces a downward sloping demand curve, but the curve is more elastic than that faced by a pure monopolist. This is because there are close substitutes available for the product of a monopolistic competitor, leading to a greater responsiveness to price changes by consumers. Hence, the demand curve that a monopolistic competitor faces is usually elastic.

A Monopolistic Competitor