What demand curve is faced by a perfectly competitive firm?
A)Horizontal.
B)Vertical.
C)Perpendicular to the quantity axis.
D)Perfectly inelastic.

Question

Quizplus · Accepted Answer

A perfectly competitive firm faces a horizontal demand curve because it must accept the market price for its product. It can sell as much as it wants at the equilibrium market price, but if it tries to charge a higher price, consumers will simply switch to a competitor. This means that the firm's marginal revenue is equal to the market price, and its demand curve is perfectly elastic, or horizontal.

What Demand Curve Is Faced by a Perfectly Competitive Firm