In pure competition, the demand for the product of a single firm is perfectly Multiple Choice A) elastic because the firm produces a unique product. B) inelastic because the firm produces a unique product. C) Elastic because many other firms produce the same product. D) Inelastic because many other firms produce the same product.

Question

Lilian Mooney

Business

21 December, 20:21

In pure competition, the demand for the product of a single firm is perfectly Multiple Choice A) elastic because the firm produces a unique product. B) inelastic because the firm produces a unique product. C) Elastic because many other firms produce the same product. D) Inelastic because many other firms produce the same product.

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Answers (1)

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Houston Snyder · Answer 1

The correct answer to the following question is option C) elastic because many other firms are producing the same product.

Explanation:

Pure competition means the perfectly competitive market where there are large number of buyers and sellers, and they all produce same type of product (homogeneous products). So here demand curve for a firm is a horizontal line, which means here the price elasticity is perfectly elastic. That means no matter how small the increase in price is, the demand for good would drop down to zero, because all firms produce same product. So here all the firms are price takers.