Which of the following is characteristic of a purely competitive seller's demand curve?

• A. It slopes downward to the right.
• B. It is perfectly inelastic.
• C. It is kinked at the prevailing market price.
• D. It is perfectly elastic at the market price.

Answer: (D)

Verified step by step guidance

1. Understand that a purely competitive seller is a price taker, meaning the firm cannot influence the market price and must accept it as given.
2. Recognize that the demand curve faced by a purely competitive seller is the individual firm's demand curve, which reflects the price at which it can sell any quantity of its product.
3. Recall that in perfect competition, the market sets the price, so the firm's demand curve is horizontal at the market price, indicating the firm can sell any quantity at that price.
4. Note that a horizontal demand curve means the demand is perfectly elastic, as the firm loses all customers if it raises the price even slightly above the market price.
5. Conclude that the characteristic demand curve for a purely competitive seller is perfectly elastic at the market price, not downward sloping, perfectly inelastic, or kinked.