Figure 16-1
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?
A)Panel A
B)Panel B
C)Panel C
D)Panel D

Question

Figure 16-1    
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?
A)Panel A 
B)Panel B 
C)Panel C 
D)Panel D

Quizplus · Accepted Answer

Panel B shows a downward sloping demand curve with some elasticity, which is typical of a monopolistically competitive market. The other panels either show a perfectly elastic or perfectly inelastic demand curve, which are not characteristics of monopolistic competition.