Why do single firms in perfectly competitive markets face horizontal demand curves?

A) With many firms selling an identical product single firms have no effect on market price.

B) With many buyers, single firms can sell as much as they want regardless of price.

C) With only a few firms in the market selling an identical product single firms have the ability to charge a constant price.

D) With each firm facing a unique demand for its product single firms have no effect on market price.

E) Both A and B.

Question

Business

Eleanor

16 November, 20:27

Why do single firms in perfectly competitive markets face horizontal demand curves?

A) With many firms selling an identical product single firms have no effect on market price.

B) With many buyers, single firms can sell as much as they want regardless of price.

C) With only a few firms in the market selling an identical product single firms have the ability to charge a constant price.

D) With each firm facing a unique demand for its product single firms have no effect on market price.

E) Both A and B.

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Answers (1)

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Chef · Answer 1

Answer: Why do single firms in perfectly competitive markets face horizontal demand curves? A) With many firms selling an identical product single firms have no effect on market price.

Explanation: A perfectly competitive market has different buyers and sellers who all sell the same product and there is nothing stopping new firms from entering and selling the same product. A horizontal demand curve happens when a product is said to be perfectly elastic meaning that the price of a good or service can not rise above the market price or the demand will be at zero.