Assume the wool industry is perfectly competitive. The market demand curve for wool is ________ and each individual wool producer's demand curve is ________.
A) downward sloping; horizontal
B) horizontal; downward sloping
C) horizontal; horizontal
D) downward sloping; downward sloping

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the market demand curve is downward sloping, reflecting the overall market's decreasing willingness to pay for higher quantities of goods. Each individual producer, however, faces a horizontal demand curve because they are price takers; the price is determined by the market, and individual producers can sell as much as they want at that price without affecting it.

Assume the Wool Industry Is Perfectly Competitive