Question

The demand curve facing a perfectly competitive firm is
A. perfectly vertical.
B. ​downward-sloping and less flat than the market demand curve.
C. the same as the market demand curve.
D. ​downward-sloping and more flat than the market demand curve.
E. perfectly horizontal.

Answer 1

Answer:

Option (E) is correct.

Explanation:

Under the perfectly competitive market conditions, there are large number of buyers and sellers and there is no restrictions on the entry and exit of the firms. Prices of the goods are determined by the market forces and the demand curve for a firm in a perfectly competitive environment varies significantly from the market demand curve. The demand curve is horizontal because all the goods in a perfectly competitive market are considered as perfect substitutes.