Question

If the demand curve of a firm is a horizontal straight line ____________.

• A. the firm can sell any amount of output at the existing price
• B. the firm can sell only a specified amount of output at the existing price
• C. all firms will sell equal amount of the commodity
• D. firms can differentiate their product

Answer 1

The correct option is A the firm can sell any amount of output at the existing price

If the demand curve of a firm is a horizontal straight line the firm can sell any amount of output at the existing price. This is seen in perfect competition.Perfect competition is a form of the market in which there is a large number of buyers and sellers and where homogeneous product is sold at a uniform price.Firm's demand curve under perfect competition is a horizontal straight line parallel to X-axis.Under perfect competition, AR is constant for a firm. Hence, AR = MR.