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Question
How is the demand curve of a firm under monopolistic competition usually described?
Options
Horizontal and perfectly elastic
Vertical and perfectly inelastic
Downward sloping and highly elastic
U-shaped and downward sloping
MCQ
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Solution
Downward sloping and highly elastic
Explanation:
The demand curve slopes downward because the firm has some price-setting power, and it is highly elastic because close substitutes are available from rival firms.
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