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 lose its market share.

Question

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 lose its market share.

Quizplus · Accepted Answer

A perfectly elastic demand curve means that any increase in price will lead to a complete loss of sales as consumers switch to perfect substitutes that are priced lower. Therefore, if the firm raises its price, its sales will fall to zero.

If a Firm Facing a Perfectly Elastic Demand Curve Raises