GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Adjust price
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Price taker
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Adjust output
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All of these
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Detailed explanation-1: -Under perfect competition, a demand curve of the firm is perfectly elastic because the firm can sell any amount of goods at the prevailing price. So even a small increase in price will lead to zero demand. This indicates that the firm has no control over price.
Detailed explanation-2: -A firm’s demand curve in perfect competition is horizontal, making it perfectly elastic since the firm is a price taker, and it has to accept the market price. The firm can produce as much of the good as it wants to because the demand for the good will not change regardless of the level of supply.
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).