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Producer's pr...

Question

Producer's price line shows highest price elasticity of demand in a state of perfect competition. Do you agree?

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Solution

Yes. In perfect competition, producer's price line shows the highest price elasticity of demand which is infinity. This is because producer's price line under perfect competition is a horizontal straight line.

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Q. Price elasticity of demand for an individual firm under perfect competition is _____________.

Q. Firm's demand curve shows highest elasticity in a state of monopolistic competition (in which there is a large number of close substitutes) than in a state of monopoly or perfect competition.

Q. State whether the following statement is True or False:
Under perfect competition, price is determined by equilibrium of demand and supply.

Q. Which one of the following is correct?
1. Elasticity of demand states the relationship between price and demand
2. Elasticity of demand explains the degree of responsiveness of demand to change in price
3. Elasticity states the inverse relationship between price and demand
4. Elasticity of demand explains the direct relationship between price and demand

Q. State whether the following statement are TRUE and FALSE.

1. There is no price discrimination under Monopolistic competition.

2. In a monopoly market, firm and industry are the same.

3. Product differentiation is not possible under perfect competition.

4. Under perfect competition, price is determined by equilibrium of demand and supply.

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