Multiple Choice
In a perfectly competitive market, we assume the product is identical in the minds of which group?
78
views
3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
In a purely competitive market, a firm's demand schedule is equal to which of the following?
A
The firm's average total cost curve
B
The market demand curve
C
The firm's marginal cost curve
D
The market price
Verified step by step guidance1
Understand that in a purely competitive market, each firm is a price taker, meaning it accepts the market price as given and cannot influence it.
Recognize that the firm's demand schedule shows the quantity of the product the firm can sell at different prices.
Since the firm is a price taker, the price it faces is constant regardless of the quantity it sells, so the demand curve for the firm is perfectly elastic at the market price.
Therefore, the firm's demand schedule is represented by a horizontal line at the market price, not by the firm's cost curves or the market demand curve.
Conclude that the firm's demand schedule equals the market price, reflecting the fact that the firm can sell any quantity at that price but none at a higher price.
Related Videos
Related Practice
