Below,the graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply. If the firm's demand and marginal revenue curves were drawn in the left-hand graph,what would be the elasticity of demand?

Question

Below,the graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply.  If the firm's demand and marginal revenue curves were drawn in the left-hand graph,what would be the elasticity of demand?

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and face a perfectly elastic demand curve, meaning that they can sell any quantity at the market price. Therefore, the elasticity of demand for a typical firm in this market is infinitely elastic (or perfectly elastic).

Below,the Graph on the Left Shows the Short-Run Marginal Cost