Question

Under perfect competition, the price is determined by the industry. At this price a firm can sell any quantity. The AR curve is perfectly elastic. Under monopoly, firms can sell more only at a lower price. So, AR is negatively sloped.
If AR is perfectly elastic, then what is the shape of the demand curve for such a form of market?

[1 mark]

• A. Parallel to the Y-axis
• B. Downward sloping from left to right
• C. Upward sloping from right to left
• D. Parallel to the X-axis

Answer 1

The correct option is D Parallel to the X-axis

A perfectly elastic demand curve means that the demand curve is a horizontal straight line parallel to the X-axis.