The demand curve for a perfectly competitive firm's product is a (vertical/horizontal) line originating at the market price.
Question
The demand curve for a perfectly competitive firm's product is a
(vertical/horizontal) line originating at the market price.
Solution
The demand curve for a perfectly competitive firm's product is a horizontal line originating at the market price.
In a perfectly competitive market, individual firms are price takers, meaning they cannot influence the market price of their product. Instead, they accept the market price as given. This results in a demand curve that is perfectly elastic (horizontal) at the prevailing market price. Therefore, firms can sell any quantity of their product at this price, but cannot sell any products at a price higher than the market price. This characteristic of the demand curve is essential to understanding how firms operate in such markets.
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