If a firm faces a horizontal demand curve
A) when it increases its price, its revenues will rise.
B) increases in revenues are possible if it increases its price.
C) increases in revenues are possible without reductions in its price.
D) it is the only seller of the product in a given market.
E) industry and product demand curves are identical.

Question

Quizplus · Accepted Answer

A horizontal demand curve indicates that the firm is a price taker in a perfectly competitive market, meaning it can sell any quantity at the market price. Therefore, it can increase revenues by selling more at the same price, without needing to reduce its price.

If a Firm Faces a Horizontal Demand Curve