ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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perfectly elastic
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perfectly inelastic
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equal to its average total cost curve
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downward-sloping
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Detailed explanation-1: -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-2: -A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it sells goods. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales.
Detailed explanation-3: -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-4: -A perfectly competitive(PC) firm’s short-run supply(SS) curve is the MC(marginal cost) curve after the point where the MC curve and AVC(average variable cost) curve intersect and the AVC is at its minimum.