In a perfectly competitive market, an increase in the market demand will shift the perfectly competitive firm's______ curve______ .

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm is a price taker and therefore its demand curve is perfectly elastic or horizontal. An increase in the market demand would increase the price that the firm can charge, leading to an upward shift in the marginal revenue curve. The firm will produce where marginal cost equals marginal revenue, which will also shift upward in response to the increased price. Therefore, choice B is the correct answer.

In a Perfectly Competitive Market, an Increase in the Market