The demand curve facing a perfectly competitive firm depends on
A)market demand alone.
B)market demand and the firm's supply curve.
C)market demand and the market supply curve.
D)market supply alone.
E)the marginal cost of the firm.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, each firm is a price taker, meaning it cannot influence the market price. Therefore, the demand curve facing the firm is perfectly elastic, and it is determined by the market demand and supply curves. The firm can sell any quantity of output it wishes to at the market price, but it cannot charge a higher price. Therefore, the correct choice is C - the demand curve facing a perfectly competitive firm depends on market demand and the market supply curve.

The Demand Curve Facing a Perfectly Competitive Firm Depends on