Question

QUESTION 25 A perfectly competitive firm faces a __________ demand curve. a. downward-sloping b. unit-elastic c. nonlinear d. perfectly elastic e. perfectly inelastic

Answer 1

Answer:

The correct answer is letter "D": perfectly elastic.

Explanation:

Perfect Competition is a theoretical market system where competition is at its highest level as possible. Perfectly competitive markets are characterized by:

• All companies offer an equivalent product.
• All companies are price takers.
• All companies have a fairly small market share.
• Buyers have full quality and pricing knowledge.
• The company has low barriers or no barriers to entering and leaving an industry .

Plotted in a graph, perfectly competitive goods have a horizontal curve. This is because at any given price any quantity can be demanded. Thus, the curve of perfectly competitive firms is perfectly elastic.