The Demand Curve Facing a Perfectly Competitive Firm

question 16

Multiple Choice

The demand curve facing a perfectly competitive firm

• A)is the same as the industry or market demand curve.
• B)is almost perfectly elastic at the market price.
• C)depends on the firm's technology.
• D)depends on the firm's costs of production.
• E)depends on the firm's output.

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Definitions:

Substitution Effect

The change in the consumption pattern of goods or services due to a change in their relative prices, causing consumers to replace more expensive items with cheaper alternatives.

Income Effect

The change in the quantity demanded of a good resulting from a change in consumer income, holding prices constant.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in price.

Total Revenues

The overall amount of money generated from sales of goods or services before deducting any expenses.