The demand curve facing a perfectly competitive firm is:
A) the same as its average revenue curve, but not the same as its marginal revenue curve.
B) the same as its average revenue curve and its marginal revenue curve.
C) the same as its marginal revenue curve, but not its average revenue curve.
D) not the same as either its marginal revenue curve or its average revenue curve.
E) not defined in terms of average or marginal revenue.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the demand curve facing an individual firm is perfectly elastic, meaning that the firm can sell any quantity of its product at the prevailing market price. This results in the firm's average revenue (AR) and marginal revenue (MR) being equal to each other and to the price of the product, hence the demand curve is the same as both its average revenue curve and its marginal revenue curve.

The Demand Curve Facing a Perfectly Competitive Firm Is