Under perfect competition,the demand curve facing an individual firm is
A)the same as the industry's demand curve.
B)downward sloping.
C)upward sloping.
D)infinitely price elastic.
E)a rectangular hyperbola.

Question

Quizplus · Accepted Answer

Under perfect competition, an individual firm is a price taker and has no control over the price. Therefore, the demand curve facing the firm is perfectly elastic or infinitely price elastic, meaning that the firm can sell any quantity it wants to at the market price. This is because if the firm raises its price even slightly, it will lose all its customers to competitors who are selling at the same price. Consequently, the demand curve facing the firm is perfectly elastic, and it is represented by a horizontal line at the market price.

Under Perfect Competition,the Demand Curve Facing an Individual Firm Is