What is the shape of the demand curve faced by a firm under perfect competition?

Negatively sloped

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Positively sloped

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Vertical

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Horizontal

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Solution

The correct option is D Horizontal
All producers are price takers and thus cannot influence the price. They simply accept the singular price determined in the market. Any variation in its output will have a negligible effect on the total supply and effectively the market price, that the effect can safely be assumed to be 0. Thus, it is parallel to the X axis.

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