Under perfect competition, the demand curve facing the firm is determined by

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Under perfect competition, the firm is a price-taker and therefore can sell as much output as it wants at the prevailing market price, but it cannot influence that price. Therefore, the demand curve for an individual firm under perfect competition is perfectly elastic (horizontal) and is determined by the intersection of the market demand and supply curves, which represents the price at which the firm can sell any given quantity of output. The tastes and preferences of consumers, as well as their utility-maximizing behavior, may affect the overall market demand, but not the demand facing a particular firm. The willingness of the firm to supply the good is reflected in its positive marginal cost curve, which intersects the market price at the level of output where the firm produces.

Under Perfect Competition, the Demand Curve Facing the Firm Is