Question

The demand curve for a perfectly competitive firm is ______, while the demand curve for a...

The demand curve for a perfectly competitive firm is ______, while the demand curve for a monopolist is ______.

Multiple Choice perfectly elastic; perfectly inelastic perfectly elastic; downward-sloping perfectly inelastic; perfectly elastic vertical; downward-sloping

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Answer #1

Since in the perfect competition, the price is fixed for every unit because firm is price taker and industry is price maker. Therefore the demand curve is horizontal line. Hence the demand curve is perfectly elastic.

On the other hand, the monopolist firm is a price maker, so the price decreases for selling more quantity. Therefore the demand curve is downward sloping. Hence the demand curve is downward sloping.

Hence it can be said that The demand curve for a perfectly competitive firm is perfectly elastic, while the demand curve for a monopolist is downward sloping.

Hence correct answer will be; perfectly elastic; downward sloping.

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