alleryUnder perfect competition, the demand curve faced by an individual firm is best described as:
AAn upward sloping straight line
BA vertical line at the market output
CA downward sloping straight line
DA horizontal line at the market price
Answer & Solution
Correct answer: D. A horizontal line at the market price
1. A competitive firm accepts the price set by industry demand and supply.
2. It can sell any quantity at that price but nothing above it without losing all buyers.
3. This makes the firm's demand curve perfectly elastic, i.e. a horizontal line.
4. The horizontal line sits at the level of the market price.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.3_
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