When a producer's demand curve is a horizontal straight line, we know that
A) market demand is horizontal as well
B) there is considerable brand loyalty for the producer's good
C) the producer is a monopolist
D) the producer has significant market share
E) the producer is in a perfectly competitive industry

Question

Quizplus · Accepted Answer

A horizontal demand curve for a producer indicates that the producer is a price taker, which is characteristic of perfect competition. In such markets, individual producers have no control over the market price and must accept the prevailing market price. This situation arises because there are many producers and consumers in the market, the goods are homogeneous, and there are no barriers to entry or exit.

When a Producer's Demand Curve Is a Horizontal Straight Line