The demand curve facing a monopolistically competitive firm is downward-sloping because:
A)substitutes for the good are easily available.
B)the firm produces homogeneous products.
C)there is only one seller in the market.
D)the price/marginal-cost markup is zero.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, there are close substitutes available for the good or service being provided. Therefore, when the firm increases the price of its product, buyers may switch to a similar product offered by a competitor, leading to a decrease in the quantity demanded of the firm's product. This results in a downward-sloping demand curve for the firm.

The Demand Curve Facing a Monopolistically Competitive Firm Is Downward-Sloping