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Why the demand curve faced by a perfectly competitive firm is horizontal?
Wiki User
∙ 14y ago
The firm at perfect competition faces more than one competitor. All the firms are price taker and they take the market price as given. If one firm wants to sell its output at a pricehigher than the market price, it will sell nothing as buyers will go to the firm offering lower market price. If one firm wants to sell its output at a lower price, it will take the whole market demand for it. At the market price, determined by interactions between sellers, the firms will sell whatever output it wants. So, the firms determine the price and each firm determines its output. So the demand curve will be horizontal.
Wiki User
∙ 14y ago
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The labor demand curve of a purely competitive seller perfectly elastic?
yes the demand curve is perfectly inelastic and horizontal
Does monopolistically competitive firms have horizontal marginal cost curve?
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
What type of curve does the perfectly competitive firm face?
perfectly elastic demand function.
What is the demand curve for output of a perfectly competitive firm?
Demand = Price = Marginal Cost.
Draw a demand curve illustrating price inelastic demand and explain how the curve relates to the definition of price elasticity of demand?
A perfectly inelastic demand curve will be completely horizontal and means that consumers would any price for a particular good, which is almost impossible. The closer to being horizontal a demand curve is, the more inelastic the demand.
The labor demand curve of a purely competitive seller perfectly elastic?
yes the demand curve is perfectly inelastic and horizontal
Does monopolistically competitive firms have horizontal marginal cost curve?
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
What type of curve does the perfectly competitive firm face?
perfectly elastic demand function.
What is the demand curve for output of a perfectly competitive firm?
Demand = Price = Marginal Cost.
Draw a demand curve illustrating price inelastic demand and explain how the curve relates to the definition of price elasticity of demand?
A perfectly inelastic demand curve will be completely horizontal and means that consumers would any price for a particular good, which is almost impossible. The closer to being horizontal a demand curve is, the more inelastic the demand.
Will the following changes affect the market price of wheat flour?
Wheat is virtually a perfectly competitive market. Therefore, its demand curve is horizontal. The only thing that could change the market price of wheat flour is a shift in the demand curve, e.g. a shift in consumer tastes.
Why does a Perfect Competition firms demand curve is also its marginal revenue curve?
AnswerFor a perfectly competitive firm with no market control, the marginal revenue curve is a horizontal line. Because a perfectly competitive firm is a price taker and faces a horizontal demand curve, its marginal revenue curve is also horizontal and coincides with its average revenue (and demand) curve. Yes - what you must remember is that a firm's demand curve in perfect competition is its average revenue curve. Average revenue = price x quantity / quantity = price. The demand curve shows the quantity demanded at varying prices and this is exactly what the average revenue curve will do.Because there are so many sellers in the market, no one firm has enough market power to influence price (if a firm tried to raise price consumers would move to different suppliers; nobody would buy the good), therefore price is determined by industry supply and demand, and a firm can produce any quantity at this price . This means that the firm faces a horizontal average revenue (demand curve) and if average revenue is constant, this means total revenue is increasing at a constant rate, and therefore marginal revenue is constant as well.
Why is the demand curve the same as the marginal revenue curve for a perfectly competitive firm?
Because for a perfectly competetive firm since the demand curve is perfectly elastic even a slightest price change doesnt add any further demand..so there is no change in marinal revenue also.Since revenue is demand multiplied with cost of unit..the two curves are same.
Explain the difference between price elasticity of demand and the slope of a demand curve?
Price elasticity is a specific type of slope of the demand curve. A perfectly inelastic demand means that the quantity will not change with the price. This line is perfectly vertical. A perfectly elastic demand curve is horizontal and means that at any given quantity, there is only one price. Also, a slope gets steeper, demand becomes more inelastic.
Why average revenue curve of a firm under perfect competition is a horizontal line?
Since a firm in a perfectly competitive market is a passive price taker, the demand curve for the individual firm is a horizontal line. This means that the firm receives the same price for any level of output. This therefore means that Margincal Revenue curve and Average revenue curve is the same as the demand curve. D=P=MR=AR For example, the price facing a particular firm (perfectly competitive) is $2. If the firm sells two pens it receives a total revenue of $4, if it sells 3 pens, then $6 and so on. $4/$2=2 $6/$2=2
What does a flat line mean in a demand curve?
If a market is faced with a horizontal demand curve, then the demand in that market by consumers is perfectly elastic. More simply, any minuscule change in price causes a huge change in quantity demanded.
Why is the demand curve for a good very unlikely to be perfectly vertical?
the demand curve for a good is very unlikely to be perfectly vertical because
