A firm that is a price taker faces a perfectly ______ demand curve.
A) horizontal
B) vertical
C) inelastic
D) convex

Question

Quizplus · Accepted Answer

A price taker has no influence on the market price and must accept the going market price. In this case, the firm's demand curve is perfectly elastic or horizontal, meaning that a small increase in price will cause the firm to lose all its customers, while a small decrease in price will attract all the customers in the market. Therefore, the firm can sell as much as it wants at the market price.

A Firm That Is a Price Taker Faces a Perfectly