Question

When a monopolistically competitive firm raises its price,
a. the market supply curve shifts outward.
b. quantity demanded falls to zero.
c. quantity demanded declines but not to zero.
d. quantity demanded remains constant?

Answer 1

b, because monopolistic market sells homogeneous goods.When a firm raises its price,it loses all of the customers

Answer 2

The correct option is C). quantity demanded declines but not to zero.

What is monopolistic competition?

Monopolistic competition is a type of market where in which many firms offer similar products or services but not perfect substitutes.

There are very low barriers on the entry and exit of the new firms in  monopolistic competition.

When a monopolistically competitive firm raises its price, the customer will choose to buy a similar product from another firm.

Learn more about monopolistic competition here:-

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