If a monopolistically competitive firm raises its price,

Question

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In monopolistic competition, firms have some degree of market power and therefore can raise their prices to a certain extent. However, as their products are differentiated from those of their competitors, consumers have some substitutes to switch to if the price increases too much. Therefore, quantity demanded would decline but not necessarily to zero. The market supply curve would not shift in response to a single firm's price change. Quantity demanded would not remain constant if the price were raised.

If a Monopolistically Competitive Firm Raises Its Price