The competitive firm's demand curve is:
A)unit elastic over the relevant range of output.
B)perfectly elastic over the relevant range of output.
C)perfectly inelastic over the relevant range of output.
D)elastic above the market price and inelastic below the market price.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the individual firm is a price taker, meaning that it has to accept the market price as given. Therefore, the firm's demand curve is perfectly elastic, as any increase in price would cause the firm to lose all its customers, and any decrease in price would not lead to an increase in the quantity demanded.

The Competitive Firm's Demand Curve Is