The demand curve perceived by a perfectly competitive firm
A. is horizontal
B. shows economies of scale over a large range of output
C. shows that such a firm is a price-marker
D. all of the above
Answer: A. is horizontal
Perfect Competition is a form of market structure in which there is free entry and exit of firms and firms are selling homogeneous and identical products in the market. Firms under this form of market are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection. Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. Demand curve of perfectly competitive market is horizontal which shows firms can sell any unit of output at given market price.
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