The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.
A)downward sloping,unlike the horizontal demand curve
B)horizontal,unlike the downward-sloping demand curve
C)horizontal,the same as that
D)downward sloping,the same as that

Question

Quizplus · Accepted Answer

The demand curve for a firm in monopolistic competition is downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm. This is because in monopolistic competition, firms have some degree of market power to differentiate their products, which allows them to charge slightly higher prices than their competitors. As a result, consumers are willing to purchase fewer units of the good as the price increases, leading to a downward-sloping demand curve. In contrast, in perfect competition, firms have no market power and sell homogenous goods, leading to a flat, horizontal demand curve where they must accept the market price in order to sell their products.

The Demand Curve for a Firm in Monopolistic Competition Is