A perfectly competitive firm's demand curve
A) has unit elasticity.
B) is a horizontal line where P = AR = MR.
C) is identical to the market demand curve.
D) is downward sloping.
E) yields constant total revenues.

Question

Quizplus · Accepted Answer

In perfect competition, a firm's demand curve is a horizontal line at the market price, which means P = AR = MR. This is because the firm is a price-taker and has no control over the market price. As a result, any increase in output will not affect the price, and the firm can sell as much as it wants to at the market price.

A Perfectly Competitive Firm's Demand Curve