The demand curve facing a firm in monopolistic competition is downward sloping, because the firm
A)sells a differentiated product.
B)is the entire industry by itself.
C)is small relative to the market.
D)sells a homogeneous product.

Question

Quizplus · Accepted Answer

The demand curve facing a firm in monopolistic competition is downward sloping because the firm sells a differentiated product. This means that consumers view the firm's product as unique and have a preference for it over other products in the market. As a result, the firm can charge a higher price and face a downward sloping demand curve, indicating that as the price of the product increases, the quantity demanded decreases.

The Demand Curve Facing a Firm in Monopolistic Competition Is