A horizontal demand curve exists for:
A) a monopoly, but not for a perfectly competitive firm.
B) a perfectly competitive firm, but not for a monopoly.
C) both a monopoly and a perfectly competitive firm.
D) either a monopoly or a perfectly competitive firm, depending on the costs of production.

Question

Quizplus · Accepted Answer

A horizontal demand curve exists only for a perfectly competitive firm. In perfect competition, the firm is a price taker and can sell any quantity of output at the market price. This means that the demand curve faced by the firm is perfectly elastic, or horizontal at the market price. In contrast, a monopoly has a downward-sloping demand curve, as the firm has market power and can control the price it charges.

A Horizontal Demand Curve Exists For