Which of the following statements is correct?
A)The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist.
B)The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal.
C)The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping.
D)The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.

Question

Quizplus · Accepted Answer

A competitive firm faces a horizontal demand curve because it has no power to influence the market price and must accept the price determined by the market. A monopolist, on the other hand, faces a downward-sloping demand curve because it has the ability to influence the price by adjusting the quantity of output it produces. As the monopolist increases output, the price decreases, causing the quantity demanded to increase but not enough to offset the decrease in price.

Which of the Following Statements Is Correct