Question

The demand curve faced by a purely monopolistic seller is?

1) perfectly inelastic, whereas that facing the purely competitive firm is perfectly elastic.
2) downward sloping, whereas that facing the purely competitive firm is perfectly elastic.
3) perfectly elastic, whereas that facing the purely competitive firm is perfectly inelastic.
4) downward sloping, whereas that facing the purely competitive firm is perfectly inelastic.

Answer 1

The demand curve faced by a monopolistically competitive firm is downward-sloping, whereas that facing a purely competitive firm is perfectly elastic.

Step-by-step explanation:

The demand curve faced by a monopolistically competitive firm is downward-sloping, whereas that facing a purely competitive firm is perfectly elastic. The demand curve faced by a monopolistically competitive firm is downward-sloping, whereas that facing a purely competitive firm is perfectly elastic.

A monopolistically competitive firm is a price maker and chooses a combination of price and quantity, so its perceived demand curve is downward-sloping. On the other hand, a purely competitive firm faces a perfectly elastic demand curve because it can sell any quantity it wishes at the prevailing market price.