In a competitive market where the elasticity of the market demand curve is -2,the elasticity of the supply curve is 1,and an individual firm faces a residual demand curve with an elasticity of -98.What happens to the individual firm's residual demand curve when the number of firms serving this market declines?
A) It becomes less elastic.
B) It becomes more elastic.
C) It does not change.
D) It cannot be determined.

Question

Quizplus · Accepted Answer

When the number of firms serving a market declines, the individual firm's residual demand curve becomes less elastic. This is because with fewer firms, each firm's share of the market increases, making the demand they face less sensitive to price changes.

In a Competitive Market Where the Elasticity of the Market