Monopolistic competition has?

Question

a- many sellers who each face a downsloping demand curve

b- only one seller who faces a downsloping demand curve

c- many sellers who each face a perfectly elastic demand curve

d- a few sellers who each face a downsloping demand curve

Answer 1

Many sellers who each face a downsloping demand curve. B and D are ruled out because it is not one or a few sellers.

It is not C because monopolistic competition has a degree of product differentiation due to brand loyalty. When a firm increases its price, some demand still remains. Therefore it's A.

Take for example, many firms selling soap. You may love Dettol soap and not any other. Therefore, if Dettol increases the price of its soap, you might choose to still buy it regardless of the price increase. This is what we mean by monopolistic competition.

Hope that helps.