The demand curve facing a perfectly competitive firm is. a. perfectly horizontal. b. perfectly vertical. downward-sloping and less flat than the market demand curve. c. the same as the market demand curve. d. downward-sloping and more flat than the market demand curve.

a. Perfectly horizontal

Explanation:

Perfect competition is a market structure that has the following characteristics:

1. There are many firms existing in the market.

2. There are no barriers to entry or exit.

3. There is free flow of knowledge.

4. Price takers - The price is set by the  market supply and demand.

5. The goods are homogenous.

Examples of perfectly competitive firms include: Tomato farmer, egg seller and a local barber.

The price in a perfectly competitive market is perfectly horizontal because the market price is set by the supply and demand in the industry (refer diagram on right attached). The firms as mentioned are price takers (refer diagram on left attached) and hence have to abide by the price in the market. If they attempt to raise the price, they will lose customers because their product is not unique and a customer can simply purchase from another vendor who would sell the same product as a lower price.

Hence it is perfectly elastic and the curve is horizontal because even a small change in price causes a massive change in quantity.

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