If a firm facing a perfectly elastic demand curve raises its price,then _____
A)it will still sell exactly the same amount of output as it did at the lower price.
B)it will lose some, but not all, of its sales.
C)its sales will fall to zero.
D)its sales will increase.
E)it will improve its market share.

Question

Quizplus · Accepted Answer

A perfectly elastic demand curve means that consumers are highly responsive to changes in price, and any increase in price will cause them to completely stop buying the product. Therefore, the firm's sales will fall to zero if it raises its price.

If a Firm Facing a Perfectly Elastic Demand Curve Raises