Question

A monopolistically competitive firm's demand curve is less elastic then a ______ firm's demand curve, but more elastic than a _______ demand curve.

Answer 1

Solution: Perfect competition ; Market demand

Explaination:-A monopolistically competitive firm's demand curve is less elastic then a Perfect competition irm's demand curve, but more elastic than a Market demand  demand curve.A monopolistic competitive firm’s demand curve is downward sloping, which means it will charge a price that exceeds marginal costs. The market power possessed by a monopolistic competitive firm means that at its profit maximizing level of production there will be a net loss of consumer and producer surplus.In a perfectly competitive market, this occurs where the perfectly elastic demand curve equals minimum average cost. In a monopolistic competitive market, the demand curve is downward sloping. In the long run, this leads to excess capacity.