The demand curve for each seller's product in perfect competition is horizontal at the market price because
A)each seller is too small to affect the market price.
B)the price is set by the government.
C)all the sellers get together and set the price.
D)all the demanders get together and set the price.

Question

Quizplus · Accepted Answer

In perfect competition, each seller is too small to affect the market price, hence the demand curve for each seller's product is horizontal at the market price. This means that the seller can sell any quantity of the product at the market price. If the seller tries to charge a higher price, the demand would drop to zero, and the seller would not be able to sell any products. Similarly, if the seller tries to charge a lower price than the market price, they would not be maximizing their profits. Therefore, in perfect competition, each seller is a price taker and has to accept the market price.

The Demand Curve for Each Seller's Product in Perfect Competition