A price-taking firm confronts a demand curve that is
A) vertical at the market price.
B) upward-sloping.
C) downward-sloping.
D) horizontal at the market price.
E) inelastic.

Question

Quizplus · Accepted Answer

A price-taking firm is a firm that has no market power and therefore must accept the market price. In this case, the demand curve faced by the firm would be horizontal at the market price, as the firm can sell as much or as little as it wants at that price without affecting the market price. Therefore, choice D is correct.

A Price-Taking Firm Confronts a Demand Curve That Is