In a perfectly competitive market the demand curve faced by an individual firm is: Group of answer choicesperfectly inelastic.relatively inelastic.perfectly elastic.relatively elastic.
Question
In a perfectly competitive market the demand curve faced by an individual firm is: Group of answer choicesperfectly inelastic.relatively inelastic.perfectly elastic.relatively elastic.
Solution
In a perfectly competitive market, the demand curve faced by an individual firm is perfectly elastic.
Here's why:
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In a perfectly competitive market, there are many buyers and sellers, and each firm sells an identical product. This means that no single firm can influence the market price.
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Because of this, each firm is a price taker, meaning they must accept the market price. If a firm tries to charge more than the market price, buyers will simply purchase from another firm, causing the first firm to lose all its customers.
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This situation is represented by a horizontal (perfectly elastic) demand curve. The firm can sell as much as it wants at the market price, but nothing at a higher price.
So, the demand curve faced by an individual firm in a perfectly competitive market is perfectly elastic.
Similar Questions
Draw the perfectly competitive market model which reflect the following question and answer the question. The demand curve for a firm in the perfectly competitive market model is equal to its: Group of answer choicesmarginal cost curve.marginal revenue curve.average total cost curve.average fixed cost curve.
A perfectly elastic demand curve implies that the firm:Multiple Choicemust lower price to sell more output.can sell as much output as it chooses at the existing price.realizes an increase in total revenue which is less than product price when it sells an extra unit.is selling a differentiated (heterogeneous) product.
The market demand curve for a perfectly competitive industry __.Multiple choice question.slopes downwardis perfectly inelasticis perfectly elasticslopes upward
Multiple Choice QuestionThe demand curve faced by a monopolistically competitive firm is Blank______.Multiple choice question.highly but not perfectly elastichighly but not perfectly inelasticperfectly inelasticperfectly elasticunit-elastic
The demand curve for a perfectly competitive firm's product is a (vertical/horizontal) line originating at the market price.
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