If the demand curve faced by an individual firm is downward-sloping, the firm cannot be
A) a monopoly firm.
B) a purely competitive firm.
C) an oligopolistic firm.
D) a monopolistically competitive firm.

Question

Quizplus · Accepted Answer

A purely competitive market consists of a large number of small firms, all producing identical products. In this market, each firm is a price taker and cannot influence the market price. Therefore, the demand curve facing each firm is perfectly elastic (horizontal), meaning that the firm can sell any quantity of output at the market price. As a result, the firm cannot have a downward-sloping demand curve. In contrast, a monopolistic firm, an oligopolistic firm, and a monopolistically competitive firm all have some degree of market power, which allows them to influence the market price and face a downward-sloping demand curve.

If the Demand Curve Faced by an Individual Firm Is