Multiple Choice
In moving along a demand curve for good x, which of the following is held constant?
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3. The Market Forces of Supply and Demand
The Demand Curve
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
For a firm operating in a perfectly competitive market, the demand curve it faces is identical to which of its other curves?
A
Its average variable cost curve
B
Its average total cost curve
C
Its supply curve
D
Its marginal revenue curve
Verified step by step guidance1
Understand that in a perfectly competitive market, the firm is a price taker, meaning it cannot influence the market price and must accept it as given.
Recognize that the demand curve facing the firm is perfectly elastic at the market price, which means the firm can sell any quantity at that price.
Recall that the marginal revenue (MR) is the additional revenue the firm earns from selling one more unit of output.
In perfect competition, since the price is constant regardless of quantity sold, the marginal revenue equals the market price, making the demand curve identical to the marginal revenue curve.
Therefore, the firm's demand curve coincides with its marginal revenue curve because both are horizontal lines at the market price.
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