A wheat farmer and a firm in a perfectly competitive market are similar in that
A)both face vertical demand curves.
B)both have to lower their prices if a rival firm lowers its price.
C)both face horizontal demand curves.
D)both will earn an economic profit if their total revenue equals their total cost.

Question

Quizplus · Accepted Answer

Both the wheat farmer and the firm in a perfectly competitive market face horizontal demand curves. This means that they have no market power and must accept the market price as given. Additionally, if a rival firm lowers its price, both the wheat farmer and the firm must also lower their prices to remain competitive. However, it is not necessarily true that both will earn an economic profit if their total revenue equals their total cost, as this depends on the market price and production costs.

A Wheat Farmer and a Firm in a Perfectly Competitive