If one were to rank the demand curve facing a firm from the least elastic to the most elastic,the ranking would be

Question

Quizplus · Accepted Answer

A monopoly faces the least elastic demand curve as it has no close substitutes and consumers have no other options but to buy from the monopolist. Monopolistically competitive firms face a relatively more elastic demand curve as they have close substitutes and their pricing decisions can significantly affect consumer demand. Finally, perfectly competitive firms face the most elastic demand curve as they are price takers and consumers have numerous substitutes to choose from. Therefore, the correct ranking of demand curve elasticity from the least elastic to the most elastic is monopoly, monopolistically competitive, and perfectly competitive. The only option that has this ranking is B.

If One Were to Rank the Demand Curve Facing a Firm