Question 4 (a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve? [3...

Question 4

(a) Why does a typical monopolistically competitive firm face a downward-sloping demand curve?
[3 marks]
(b) What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?
[7 marks]

Expert Solution

ANSWER a

This is due to large close substitues of the product available in the monopolistic market . When price of particular product decreses the demand for that product increases and vise versa.

Rahul Sunny answered 1 year ago

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