If many good substitutes exist for a competitive firm's product,what type of demand curve does it face
A)unit elastic
B)perfectly inelastic
C)perfectly elastic
D)inelastic only over a certain region

Question

Quizplus · Accepted Answer

When many good substitutes exist for a competitive firm's product, consumers have a lot of alternatives to choose from, and as a result, the firm's demand curve becomes  perfectly elastic. This means that the firm can only sell a certain quantity of output at a given price as any attempt to increase the price of its product above the current market price will immediately cause demand for its product to collapse. Therefore, a competitive firm will always charge the market price for its product as it has no market power to influence the price.

If Many Good Substitutes Exist for a Competitive Firm's Product,what