The demand faced by the perfectly competitive firm is perfectly elastic, meaning that price and marginal revenue are equal.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many buyers and sellers, and no single seller has the power to influence the market price. Therefore, the demand faced by a perfectly competitive firm is perfectly elastic, meaning that any increase in price would cause the firm to lose all its customers, and any decrease in price would lead to an infinite increase in demand. As a result, the price and marginal revenue (the additional revenue earned from selling one more unit) are equal for the firm in perfect competition.

The Demand Faced by the Perfectly Competitive Firm Is Perfectly