Because a monopolistically competitive firm is usually in competition with other firms producing similar goods, we generally say:
A) their demand curve is perfectly elastic.
B) their demand curve is less elastic than that for a monopolist.
C) their demand curve is more elastic than that for a monopolist.
D) their demand curve is more elastic than that for a perfectly competitive firm.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms are in competition with other firms producing similar goods, therefore their demand is more elastic than that for a monopolist. This is because consumers have substitutes available that are close substitutes, so they have many options to choose from in terms of similar products, which means that they can easily switch to a competitor's product if the monopolistically competitive firm raises their prices.

Because a Monopolistically Competitive Firm Is Usually in Competition with Other