than would a perfectly competitive industry. See the following Clear It Up feature for more detail on the impact

of demand shifts.

CLEAR IT UP

Why does a shift in perceived demand cause a shift in marginal revenue?
We use the combinations of price and quantity at each point on a firm’s perceived demand curve to calculate total

revenue for each combination of price and quantity. We then use this information on total revenue to calculate

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10.1 • Monopolistic Competition 245

marginal revenue, which is the change in total revenue divided by the change in quantity. A change in perceived

demand will change total revenue at every quantity of output and in turn, the change in total revenue will shift

marginal revenue at each quantity of output. Thus, when entry occurs in a monopolistically competitive industry, the

perceived demand curve for each firm will shift to the left, because a smaller quantity will be demanded at any given
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