Chapter 67, Problem 4MCQ

To determine

To choose: the option that best describes the demand curve of monopolistic competition,

Answer to Problem 4MCQ

The correct option is B i.e. downward sloping.

Explanation of Solution

The monopolistic competitors demand curve is not a flat one, but rather it is downward-sloping, this means that the monopolistic competitor, just like the monopoly, can increase its price without the fear of dropping all of its customers or can decrease its price and gain more and more customers.

  

The monopolistic competitive markets demand curve slopes downward which states that as the price decreases, the quantity demanded that good increases. 

Economics Concept Introduction

Introduction:

Monopolistic Competition: Where there are differentiated goods, there are many firms and there is the freedom to enter and exit.