Multiple Choice QuestionA firm operating in pure competition has a downward sloping demand curve due to the fact that the curve identifies Blank______.Multiple choice question.an direct relationship between price paid and quantity purchaseda perfectly elastic relationship between price paid and quantity purchasedan perfectly inelastic relationship between price paid and quantity purchasedan inverse relationship between price paid and quantity purchased
Question
Multiple Choice QuestionA firm operating in pure competition has a downward sloping demand curve due to the fact that the curve identifies Blank______.Multiple choice question.an direct relationship between price paid and quantity purchaseda perfectly elastic relationship between price paid and quantity purchasedan perfectly inelastic relationship between price paid and quantity purchasedan inverse relationship between price paid and quantity purchased
Solution
The correct answer is "a perfectly elastic relationship between price paid and quantity purchased".
In a perfectly competitive market, firms are price takers, meaning they must accept the market price. The demand curve for a firm in perfect competition is perfectly elastic, which means it is a horizontal line at the market price. This is because if the firm tries to charge even a little bit more than the market price, consumers will buy from other firms instead, causing the firm's quantity demanded to drop to zero. Therefore, the firm's demand curve does not slope downwards; it is flat.
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