In the graph above one would expect the demand curve facing a monopolistically competitive firm to be
A)More elastic than a monopoly in the same industry
B)Less elastic than a monopoly in the same industry
C)More elastic than a perfectly competitive firm in the same industry
D)As elastic as a monopoly in the same industry

Question

Quizplus · Accepted Answer

In monopolistic competition, firms produce products that are somewhat differentiated from their competitors. Therefore, consumers have some degree of choice between similar products, which means that the demand curve facing a monopolistically competitive firm is more elastic than a monopoly in the same industry. However, in a perfectly competitive market, firms produce homogenous products, and the demand curve facing each firm is perfectly elastic.

In the Graph Above One Would Expect the Demand Curve