The demand curve for a monopolistically competitive firm has a:
A) positive slope and the marginal revenue curve has a negative slope.
B) positive slope and the marginal revenue curve has a positive slope.
C) negative slope and the marginal revenue curve has a negative slope.
D) negative slope and the marginal revenue curve has a positive slope.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms have downward-sloping demand curves because they have market power, but they still face competition from other firms producing similar products. The marginal revenue curve for a monopolistically competitive firm will have a negative slope because each additional unit sold will bring in less revenue due to the need to lower the price in order to increase sales. Therefore, choice C is the correct answer.

The Demand Curve for a Monopolistically Competitive Firm Has A