The Perfectly Elastic Demand Curve Faced by a Competitive Firm

question 11

Multiple Choice

The perfectly elastic demand curve faced by a competitive firm means that

• A) the product's price will be unaffected by any realistic change in the firm's level of output.
• B) the firm could increase total revenue by increasing the price.
• C) it could actually sell an infinite amount of output at the going price.
• D) as the firm expands output its marginal revenue will fall.
• E) total revenue is constant regardless of quantity produced.

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Definitions:

Cognitive Flexibility

The mental ability to switch between thinking about two different concepts, or to think about multiple concepts simultaneously, facilitating problem-solving and adaptation.

Analytical Reasoning

The process of evaluating information to solve problems through logical thinking and analytical skills.

B. F. Skinner

An influential American psychologist known for his work in behaviorism and development of operant conditioning – a method of learning that occurs through rewards and punishments.

Reinforcement

In psychology, a process in which a behavior is strengthened or increased by a consequence, such as a reward or a removal of an unpleasant stimulus.