Explain the distinction in perfect competition between the market demand curve and the demand curve facing...

Explain the distinction in perfect competition between the market demand curve and the demand curve facing a single firm.

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Expert Solution

The demand curve in a perfectly competitive market is a horizontal straight line as the firms are price takers so the price = marginal cost = marginal revenue = demand.It shows that the firm cannot charge any price and the demand curve is perfectly elastic

The demand curve in a monopoly or a market with a single firm would be downward sloping as the firm is a price maker sets its own price.As it the sole seller, it sets its own price and a downward sloping demand curve means that it can charge a different price to change the demand and revenue.

Rahul Sunny answered 1 year ago

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