Perfectly elastic demand curve signifies that _________.

the firm does not exercise any control over the price of the product

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the firm can sell any amount of the product as it likes at the ruling price

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both (a) and (b)

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none of the above

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Solution

The correct option is D both (a) and (b)
Perfect competition is a type of market where there are large number of buyers and sellers who deals in homogeneous product due to which no individual unit is able to influence the price of the product and the firms have to quote the price that prevails in the market.

The demand curve is perfectly elastic because at the prevailing quantity any number of quantity can be bought and sold.

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