Richard raises Rhode Island Red chickens. Consumers, when buying chicken in the supermarket, view all other types of chickens as perfect substitutes for the Rhode Island Red. There are no barriers to entry in the chicken industry and, as a result, there are many, many chicken producers. An economist knows that
A) if Richard raises his price, he differentiates his chickens from the others on the market
B) the demand curve Richard faces is horizontal
C) if Richard lowers his price, he differentiates his chickens from the others on the market
D) Richard can increase brand loyalty and market share by advertising
E) Richard's relevant market is not chicken

Question

Quizplus · Accepted Answer

The demand curve Richard faces is horizontal because consumers view all types of chickens as perfect substitutes, indicating a perfectly competitive market where producers are price takers, and any attempt to raise prices would result in losing all customers to competitors.

Richard Raises Rhode Island Red Chickens