Which of the following is characteristic of a perfectly competitive seller's demand curve?
A)price and marginal revenue are equal at all levels of output
B)average revenue is less than price
C)its elasticity is "1" at all levels of output
D)it is the same as the market demand curve
E)it is perfectly inelastic

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the seller faces a horizontal demand curve, which means that the price and marginal revenue are equal at all levels of output. This is because the seller can sell all of its output at the market price, so if it wants to increase its revenue, it must lower the price of all units, which reduces the marginal revenue for each unit sold. Therefore, the seller's demand curve in a perfectly competitive market is perfectly elastic, with an elasticity of "1" at all levels of output. It is different from the market demand curve, which is downward sloping. Average revenue is equal to price in a perfectly competitive market, not less than price. Lastly, a perfectly competitive seller's demand curve is perfectly elastic, not inelastic.

Which of the Following Is Characteristic of a Perfectly Competitive