The demand for the product of a competitive price-taker firm is:
A) perfectly inelastic.
B) perfectly elastic.
C) greater than zero but less than one.
D) dependent on the availability of substitutes for the firm's product.

Question

Quizplus · Accepted Answer

A competitive price-taker firm faces a perfectly elastic demand curve because it can sell any quantity of output at the prevailing market price. If the firm were to charge a price even slightly above the market price, it would not be able to sell any output. Therefore, the demand for the product of a competitive price-taker firm is perfectly elastic.

The Demand for the Product of a Competitive Price-Taker Firm