ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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parallel to the vertical axis.
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U-shaped
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parallel to the horizontal axis
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downward sloping.
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Detailed explanation-1: -The demand curve for a perfectly competitive market is horizontal as the demand is perfectly elastic. This is because all firms can sell however much they want at the market price and at the market price only.
Detailed explanation-2: -A perfectly competitive firm’s demand curve is a horizontal line at the market price. This result means that the price it receives is the same for every unit sold. The marginal revenue received by the firm is the change in total revenue from selling one more unit, which is the constant market price.
Detailed explanation-3: -The demand curve for a PC(perfectly competitive) firm is perfectly elastic because the firms are price takers and they cannot raise or reduce the price of their product. Therefore, the demand curve is a horizontal line where the price is equal to the MR(marginal revenue).
Detailed explanation-4: -We look in more detail how the equilibrium quantity and price is determined in a perfectly competitive market. Perfect Competition # A perfectly competitive firm is a price taker and faces a horizontal demand curve.