Question

n the theory of perfect competition, the assumptions of many buyers and sellers, the production of a homogeneous product, and the possession of all relevant information by buyers and sellers imply that the perfectly competitive firm a. has a demand curve that is perfectly inelastic. b. has a demand curve that is perfectly elastic. c. sets the price it wishes. d. has a demand curve that is downward sloping

Answer 1

b. has a demand curve that is perfectly elastic. c. sets the price it wishes

Step-by-step explanation:

Elasticity of demand is a measure of the degree of change in quantity demanded to changes in price.

For a perfectly elastic demand it means that an infinite quantity of a product will be required by consumers at a particular price. The perfectly elastic demand curve is usually horizontal.

In perfectly competitive markets elasticity of demand is perfectly elastic because there are many buyers and sellers, production of a homogeneous product, and the possession of all relevant information by buyers and sellers.

So prices between products tend to be the same