If a firm is a price taker, the demand curve faced by the firm is

Question

Quizplus · Accepted Answer

If a firm is a price taker, it has no control over the price and must accept the prevailing market price. Therefore, the demand curve faced by the firm is perfectly elastic or horizontal at the market price. If the firm were to raise its price, it would lose all its customers to other sellers offering the same good at the prevailing market price. Similarly, if the firm were to lower its price, it would not gain any extra customers as buyers can already purchase the same good at the market price.

If a Firm Is a Price Taker, the Demand Curve