In a monopolistic competition market, a firm sets its price based on the perceived demand for its differentiated product. This is analogous to how a musician might set ticket prices based on the popularity of their music. A:B :: C:? What is the best analogy for how a firm reacts to changes in demand?

In a monopolistic competition market, a firm adjusts its prices in response to changes in demand for its unique product, much like a musician changes ticket prices based on how popular their concert is. If a musician's recent album becomes a hit, they might raise ticket prices because more fans want to attend the concert. Similarly, if a firm notices that more customers want its product, it can increase its price to maximize profits. Conversely, if demand decreases, the firm might lower its prices to attract more buyers, ensuring it sells enough products. Thus, the best analogy for how a firm reacts to changes in demand is: A musician adjusts ticket prices based on concert popularity, just as a firm adjusts prices based on product demand.