The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-The demand curve faced by a perfectly competitive firm is:
A)perfectly inelastic.
B)relatively elastic.
C)unit elastic.
D)perfectly elastic.
E)relatively inelastic.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-The demand curve faced by a perfectly competitive firm is:
A)perfectly inelastic. 
B)relatively elastic. 
C)unit elastic. 
D)perfectly elastic. 
E)relatively inelastic.

Quizplus · Accepted Answer

The demand curve faced by a perfectly competitive firm is perfectly elastic, meaning that any increase in price will result in no sales, and any decrease in price will result in an infinite increase in sales. This is represented by the MR curve being perfectly elastic and equal to the market price.

The Figure Given Below Shows the Revenue and Cost Curves