GCEEconomicsMarket Structures2024

In monopolistic competition, the demand curve faced by an individual firm is

Aperfectly elastic because the product is homogeneous
Bperfectly inelastic because the firm is a price maker
Cdownward sloping because the firm sells a differentiated productCORRECT
Dhorizontal because there are many sellers in the market
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
In monopolistic competition, each firm sells a slightly differentiated product, giving it some degree of market power. This means the firm faces a downward-sloping demand curve — it can raise its price without losing all customers, unlike in perfect competition. The downward slope reflects the imperfect substitutability between the differentiated products of competing firms.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →

Practice more Economics questions

GCE Economics has thousands more questions like this — with Worked answers on every one.

Start practicing free →See all Economics questions