The demand curve of a monopolistically competitive producer is
A) less elastic than that of either a pure monopolist or a pure competitor.
B) less elastic than that of a pure monopolist, but more elastic than that of a pure competitor.
C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.
D) more elastic than that of either a pure monopolist or a pure competitor.

Question

Quizplus · Accepted Answer

The demand curve of a monopolistically competitive producer is more elastic than that of a pure monopolist but less elastic than that of a pure competitor. This is because the monopolistically competitive producer faces competition from substitutes, which makes consumers more responsive to changes in price compared to a pure monopolist. However, unlike in a pure competitor market, the monopolistically competitive producer has some market power due to differentiated products, which makes the demand curve less elastic than that of a pure competitor.

The Demand Curve of a Monopolistically Competitive Producer Is