What explains the horizontal demand curve for a Firm in a perfectly competitive market? How does...
What explains the horizontal demand curve for a Firm in a perfectly competitive market? How does this differ from the Market demand curve in a perfectly competitive market? Explain the behavior of marginal revenue in a Market compared to a Firm.
Homework Answers
Answer
Perfect competition market is a market in which large number of buyers and large no of seller are available . firm is price taker and all goods are identical. in a perfect competition market industry is price maker and firms are price taker so they can not affect the price of goods because here large no of seller are available .
in this market AR and MR both are equal because price is constant .
( In this market AR= demand curve)
AR and demand curve are horizontal to OX axis.
it represent that at a fixed price p firm can sold any quantity
of goods.
Difference between firms and market demand curve.
firms demand curve are horizontal to ox axis because firm is Price taker . firm cannot affect the price .( firm demand curve are shown in above picture.)
( Market demand curve )
Industry inperfect competition is price maker and demand curve
of a industry is downward slipping from left to right.
(3) Marginal revenue curve behavior in industry and firm.
*Marginal revenue curve of firm .
MR curve is horizontal to ox axis because firm is price taker
and firm adjust their sale according to industry price.
* Marginal revenue curve of industry
marginal revenue curve of industry is downward slopping because
AR=Price and MR curve is under AR and left to right .
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