Question

Compared to the perfectly competitive firm, the monopolist faces a demand curve that is ___________________ elastic because there are ______________ substitutes for the product produced by the monopolist.

Answer 1

fewer; less

Compared to the perfectly competitive firm, the monopolist faces a demand curve that is less elastic because there are fewer substitutes for the product produced by the monopolist.

What is the demand curve faced by a perfectly competitive firm and a monopolistic?

A firm's demand curve is perfectly elastic under perfect competition because it can sell any quantity of commodities at the going rate. Therefore, even a slight price rise will result in no demand. This suggests that the company has no influence over price. Large businesses, on the other hand, that are subject to monopolistic competition, deal with differentiated products based on brand. As a result, the demand curve has a decreasing slope and enjoys monopoly power. Only by lowering the price of the product and selling close substitutes will it be able to sell more goods. As a result, under perfect competition, the demand curve facing a firm is perfectly elastic, while under monopolistic competition, it is less elastic.

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