Final answer:
In monopolistic competition, when a firm charges an excessive price for its product, consumers are likely to buy a rival firm's product. There are usually substitutes available, and the demand curve is downward-slopping, giving consumers alternatives if prices rise too much.
Step-by-step explanation:
In monopolistic competition, if a firm begins to charge an excessive price for its product, consumers will buy a rival firm's product instead. This is because the demand curve a monopolistic competitor faces is downward-sloping, indicating that there are substitutes available. Consumers have the option to switch to these substitutes if they feel that the product is no longer worth the higher price. Unlike a monopoly, where consumers have no close substitutes, a monopolistic competitor must keep prices in line with what consumers are willing to pay.
When a monopolistic competitor implements a successful advertising campaign, it generally leads to an increase in demand, which allows the firm to raise the price and supply more, capitalizing on the increased consumer interest. However, if the price is raised too much, consumers may revert to purchasing similar products from competitors, thereby negatively affecting the original firm's sales and potential profits.