The demand curve for each perfectly competitive firm is
A)Downward-sloping.
B)Horizontal.
C)Vertical.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, each firm faces a horizontal demand curve as they are price takers and they must accept the market price in order to sell their output. Any attempt to charge a higher price would result in the loss of all customers to competitors who charge the market price. Therefore, the demand curve for each firm is perfectly elastic (horizontal) at the prevailing market price.

The Demand Curve for Each Perfectly Competitive Firm Is