For a monopolistic firm, the demand for its product is:

• A. downward sloping, meaning the firm must lower price to sell more units
• B. perfectly elastic, allowing the firm to sell any quantity at the market price
• C. upward sloping, meaning the firm can raise price and sell more units
• D. perfectly inelastic, so the firm can charge any price without affecting quantity sold

Answer: (A)

Verified step by step guidance

1. Understand the nature of demand faced by a monopolistic firm: Unlike a perfectly competitive firm, a monopolist is the sole seller in the market, so it faces the entire market demand curve.
2. Recall the shape of the demand curve for a monopolist: Since the monopolist can influence the market price, the demand curve is not perfectly elastic but downward sloping.
3. Interpret what a downward sloping demand curve means: To sell more units, the monopolist must lower the price, because consumers will buy more only at lower prices.
4. Contrast with other options: A perfectly elastic demand means the firm is a price taker (typical in perfect competition), an upward sloping demand is not typical for demand curves, and perfectly inelastic demand means quantity demanded does not change with price, which is unrealistic for a monopolist.
5. Conclude that the correct description of the monopolist's demand curve is 'downward sloping, meaning the firm must lower price to sell more units.'