If individual firms face a horizontal demand curve at a given market price

Question

Quizplus · Accepted Answer

When facing a horizontal demand curve, individual firms are price takers, which means that they can sell as much as they want at the market price. Therefore, marginal revenue (MR) equals the price. In order to maximize profits, firms should produce at the level of output where marginal cost (MC) equals MR (which is equal to the market price). Therefore, the correct answer is C: price is equal to marginal revenue.

If Individual Firms Face a Horizontal Demand Curve at a Given