Question

A perfectly competitive firm perceives its demand curve as ________ while a monopoly perceives the demand...

A perfectly competitive firm perceives its demand curve as ________ while a monopoly perceives the demand curve as ________.

A. downward-sloping; flat

B. upward-sloping; flat

C. horizontal; downward-sloping

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Answer #1

The demand curve for a perfectly competitive firm is horizontal. Because, they don't have any market power that is for a perfectly competitive firm the price remains constant. Due to this limitation the demand curve of the firm is equal to the price and is horizontal.

In case of monopoly the firms have market power that is they can influence the market price. Hence the demand curve faced by them is downward sloping.

A perfectly competitive firm perceives its demand curve as horizontal while a monopoly perceives the demand curve as downward sloping.

Option C.

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