What makes the demand curve of the perfectly competitive firm uniquely different from that of firms in other kinds of market structures?
The perfectly competitive firm's demand curve is horizontal, which means it can sell as much as it wants at the market price. This is possible because each firm under perfect competition is so insignificant relative to the market as a whole that it has no influence over price; it is a price taker.
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"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect
What will be an ideal response?
Starting a fishing business
a. is safe because the price of fish is stable b. requires little prior knowledge c. involves no significant entry costs d. is a risky way to make a living e. does not involve opportunity costs
When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease. B. prices, causing them to definitely rise. C. output, causing it to definitely increase. D. prices, causing them to definitely fall.
To maintain a monopoly, a firm must have
A) a perfectly inelastic demand. B) an insurmountable barrier to entry. C) marginal revenue equal to demand. D) few competitors.