Which of the following is TRUE for the perfectly competitive firm?

Question

Quizplus · Accepted Answer

In perfect competition, firms are price-takers, meaning they cannot control the market price and must accept the prevailing market price. As a result, the demand curve facing a perfectly competitive firm is perfectly elastic, or horizontal at the market price level. Therefore, the marginal revenue (MR) curve is also horizontal and coincides with the price (P) curve, making A the correct choice. AR (average revenue) is equal to price in perfectly competitive markets. Choice B and C are incorrect because they assume that the AR curve slopes downward or upward, which is not the case in perfect competition. The price elasticity of demand varies across different ranges of the demand curve and can be greater or less than 1 in a perfectly competitive market, making choice D incorrect.

Which of the Following Is TRUE for the Perfectly Competitive