CA Foundation P4 · Chapter 4 · Question 1 of 15
The demand curve facing an individual firm under perfect competition is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Perfectly elastic (horizontal) at the market price
Explanation
A perfectly competitive firm is a price taker: it can sell any quantity at the price set by industry demand and supply. Its demand (AR = MR) curve is therefore horizontal. A kinked demand curve is associated with oligopoly.
More Price Determination in Different Markets MCQs
- Q3If average revenue is Rs. 60 and price elasticity of demand is 3, marginal revenue is:
- Q4Market demand is Qd = 200 - 5P and market supply is Qs = 50 + 10P. The equilibrium price and quantity are:
- Q5In the short run, a perfectly competitive firm will shut down if the market price falls below:
- Q6In long-run equilibrium under perfect competition, each firm:
- Q7Which statement about a profit-maximising monopolist is correct?