Question

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand A. will also be -0.3. B. will range between -0.3 and -1.0. C. will be infinite. D. depends on how large a crop the farmer produces.

Answer 1

The correct answer is option C.

Step-by-step explanation:

A perfectly competitive firm faces a perfectly elastic demand curve. In a perfectly competitive market, there is a large number of buyers and sellers, such that no single firm is able to affects the price or output level. The demand curve faced by a single firm is a horizontal line.

The market demand curve, on the other hand, is downward sloping. So whatever be the market elasticity of demand, the elasticity of individual firm will be infinite.