The demand curve confronting a competitive firm
A)Equals the marginal revenue curve.
B)Is horizontal,as is the market demand curve.
C)Slopes downward,while the market demand curve is horizontal.

Question

Quizplus · Accepted Answer

The demand curve confronting a competitive firm equals the marginal revenue curve since the firm is a price taker and can sell any quantity at the market price. Therefore, the firm's marginal revenue is equal to the market price, which is reflected in the demand curve. Choice B is incorrect because the market demand curve reflects the total demand for the product in the market, while the firm's demand curve reflects only the demand for the firm's product at different prices. Choice C is incorrect because the slope of the firm's demand curve is downward, reflecting the law of demand, while the slope of the market demand curve depends on the elasticity of demand for the product.

The Demand Curve Confronting a Competitive Firm