D. Larger; Larger

Reason: Residual demand is generally observed in oligopoly form of market structure. Assuming that there exists only one firm in the market, then the seller will tend to maximise his profits at the point where MR= MC, and will set his price and output accordingly. But when another firm enters the market selling identical product, then the seller who entered first will no longer remain a monopoly. The market will become a duopoly form of market and both the sellers will become interdependent on each other for price and output decisions. In such a case, initially when there existed only one firm in the market, the seller was a monopolist and faced no competition. But when the other firm entered the market, the first firm will have to compete with the second firm for market share, and will have to carefully decide the price and output that he wants to sell. So we see that availability of close substitute and competition makes individual seller's demand more price elastic, thus making the demand facing each individual firm more sensitive to the changes in price.