Refer to Figure 15-2. Which of the following statements is correct? a. Panel B r

Question

Refer to Figure 15-2. Which of the following statements is correct?

a. Panel B represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly. b. Panel A represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. c. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. d. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly. Refer to Figure 15-2. Which of the following statements is correct? a. Panel B represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly. b. Panel A represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. c. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. d. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly.

Explanation / Answer

The correct answer is option C.

Remember: In a monopoly, firms face a downward sloping demand curve because they have some pricing power. In perfect competition, demand is perfectly elastic, and hence firms face a horizontal demand curve as they have no pricing power and they are price takers not price makers.

Hope my solution solves your query.

Regards.

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