If a firm is a perfect competitor, then

Question

Quizplus · Accepted Answer

In perfect competition, there are many firms producing a homogeneous product, so each firm is a price-taker and unable to independently set the price. The demand curve for the product is perfectly elastic as consumers can easily switch to a substitute product offered by another firm if the price is higher. As there are no barriers to entry or exit, firms will earn zero economic profit in the long run. Therefore, the correct statement is that the demand curve for the product is perfectly elastic.

If a Firm Is a Perfect Competitor, Then