Refer to the above graph for a firm in pure competition.Line B is horizontal because:

Question

Quizplus · Accepted Answer

Line B is the demand curve facing a perfectly competitive firm, which is perfectly elastic. This means that any increase in the quantity sold would cause the price to fall to the market price, and any decrease in the quantity sold would cause the price to increase to the market price. Thus, marginal revenue equals price, and is constant at all levels of output, resulting in a horizontal line.

Refer to the Above Graph for a Firm in Pure