Exhibit 8-1

-The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. Exhibit 8-1 shows cost data for one firm and demand data for one consumer. What does the demand curve facing a single firm look like?

Question

Exhibit 8-1
 
-The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. Exhibit 8-1 shows cost data for one firm and demand data for one consumer. What does the demand curve facing a single firm look like?

Quizplus · Accepted Answer

In a perfectly competitive market, each firm faces a horizontal demand curve at the market price. In this case, the market price is determined by the intersection of the market demand and supply curves, which occurs at a price of $100. Therefore, the demand curve facing a single firm will also be horizontal at a price of $100.

Exhibit 8-1 -The Perfectly Competitive Firewood Market Is Composed of 1,000 Identical