When significant changes in the output of a single firm have no perceptible effect on the industry price or output,the demand curve facing the firm is
A) of unitary elasticity.
B) horizontal.
C) perfectly price inelastic.
D) downward sloping.
E) subelastic.

Question

Quizplus · Accepted Answer

When significant changes in the output of a single firm have no perceptible effect on the industry price or output, it means the firm is selling in a perfectly competitive market. In a perfectly competitive market, the demand curve facing the firm is horizontal, because the firm can sell as much as it wants at the prevailing market price. Thus, the correct choice is B, as the firm faces a horizontal demand curve.

When Significant Changes in the Output of a Single Firm