Perceived Demand for a Monopolistic Competitor

A monopolistically competitive firm perceives a demand for its goods that is an intermediate case between

monopoly and competition. Figure 10.2 offers a reminder that the demand curve that a perfectly competitive

firm faces is perfectly elastic or flat, because the perfectly competitive firm can sell any quantity it wishes at

the prevailing market price. In contrast, the demand curve, as faced by a monopolist, is the market demand

curve, since a monopolist is the only firm in the market, and hence is downward sloping.
240 10 • Monopolistic Competition and Oligopoly

FIGURE 10.2 Perceived Demand for Firms in Different Competitive Settings The demand curve that a perfectly

competitive firm faces is perfectly elastic, meaning it can sell all the output it wishes at the prevailing market price.

The demand curve that a monopoly faces is the market demand. It can sell more output only by decreasing the price
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