Perfectly elastic demand curve
Problem: Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly elastic? (i.e. horizontal at the going market price). Just 1 or 2 sentences needed.
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Task: I'm having a little trouble fully grasping the price-taker firm concept. I understand that there are two features of the demand facing a firm will ensure that the firm must act as a price taker:
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Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly elastic? (i.e. horizontal at the going market price). Just 1 or 2 sentences needed.
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Task: Consider a firm that has just built a small plant, which cost $4,000. Each unit requires $2.00 worth of materials. Each worker costs $7.00 per hour.
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