PRC-3 · Chapter 11 · Question 10 of 57
A local farmer selling fresh strawberries in a perfectly competitive market can sell his entire harvest at the prevailing market price of Rs. 100/kg. If he tries to charge Rs. 101, his sales immediately drop to zero. The demand curve facing this individual farmer is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Perfectly elastic (horizontal)
Explanation
In perfect competition, an individual firm faces a perfectly elastic (horizontal) demand curve because consumers will instantly switch to identical competitors if the firm raises its price even slightly.
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