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A monopolistically competitive firm faces a downwardminussloping demand curve becauseA.its market decisions are affected by the decisions of its rivals.B.of product differentiation.C.there are few substitutes for its product.D.it is able to control price and quantity demanded.

Respuesta :

Answer: Option (B) is correct.

Explanation:

Correct option: product differentiation.

In a monopolistic competitive market, there are large number of sellers which are producing similar products or close substitute but the products are different enough that the demand curve for each firm is downward sloping.

The firms in a monopolistic competitive market have zero economic profit in the long run because of the less restrictions on the entry and exit of the firms.

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