What happens to an incumbent firm's demand curve in monopolistic - ProProfs Discuss
Topics
Products
Follow Us:

What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter?



A. It shifts left and becomes less steep.
B. It becomes horizontal.
C. It shifts right and becomes more steep.
D. New entrants will not affect an incumbent firm s demand curve.

This question is part of Micro: Chapter 12
Asked by Twright, Last updated: Jan 12, 2020

+ Answer
Request

2 Answers

E. Stanley

E. Stanley, Technical writer, Indianapolis

Answered Aug 23, 2018

As new firms enter the competition, the demand for the single firm is reduced. This means that the demand curve will shift to become less steep. This is indefinitely due to more firms introducing the product. When a single business was involved in catering to clients the demand for the product was higher.

However, when more businesses came into view, the demand grew lower and lower as more firms catered the product. This is how competition works. The more the sellers, the lower is the demand for a single firm. This also plays a major part in the investment world when entrepreneurs are considering a new startup.

 

John Smith

John Smith

Answered May 16, 2017

It shifts left and becomes less steep.
 

Search for Google images
Select a recommended image
Upload from your computer
Search for Google images
Select a recommended image
Upload from your computer
Search for Google images
Select a recommended image
Upload from your computer

Email Sent
We have sent an email to your address "" with instructions to reset your password.