In Monopolistic Competition there are many close competitors, so demand tends to be very elastic. If your favorite restaurant raises prices you may continue to dine there, but perhaps less often and you may dine at your second favorite a little more often. Demand is price sensitive (elastic).

   Increasing sales means reducing price of all units so MR lies below demand. To continue our restaurant example, lowering prices would mean printing new menus so all meals would be offered at the lower price.

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