The downward-sloping demand curve for a monopolistically competitive firm:

A) reflects product differentiation.
B) eventually will become perfectly elastic as more firms enter.
C) indicates collusion among firms in the industry.
D) ensures that the firm will produce at minimum average cost in the long run.

Product Differentiation

The attempt by firms to convince buyers that their products are different from those of other firms in the industry. If firms can so convince buyers, they can charge a higher price.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes by an infinite amount in response to any change in price; depicted by a horizontal line in price-quantity graphs.

Collusion

Cooperation among producers to limit production and raise prices so as to raise one another’s profits.