Question

number 10

A perfectly competitive producer’s demand curve is:

a. downward sloping but more elastic than the market-demand curve.

b. also the market-demand curve.

c. upward sloping.

d. a vertical line.

e. a horizontal line.

Answer 1

Answer 10

Market demand curve in a perfect competitive market is a downward sloping but a perfect competitive producer(or firm) faces horizontal line demand curve because a perfect competitive firm is a price taker and always have to face price determined by a market.

In a perfect competitive market there are large number of sellers selling identical products. For a price greater than equilibrium price, demand faced by a firm is zero because in that case demand will shift to other producers because they all are selling identical goods. Thus, a perfect competitive firm always faces horizontal demand curve because they are price takers

Hence, the correct answer is (e) horizontal line.