Answer: horizontal.

## Explanation In perfect competition, a firm is a **price taker**, meaning it cannot influence the market price. The demand curve faced by an individual perfectly competitive firm is **perfectly elastic** (horizontal) at the market price. ### Key Concepts: 1. **Perfect Competition Characteristics**: - Many buyers and sellers - Homogeneous products - Perfect information - Free entry and exit - Price takers 2. **Why Horizontal?**: - The firm can sell any quantity at the market price - If the firm tries to charge above market price, it sells zero units - There's no incentive to charge below market price - The firm's marginal revenue equals price 3. **Contrast with Market Demand**: - The **market demand curve** for the entire industry is downward sloping - The **firm's demand curve** is horizontal at the market equilibrium price 4. **Graphical Representation**: - Horizontal line at P = market price - Perfectly elastic (price elasticity of demand = ∞) ### Why Not Other Options?: - **A. Vertical**: This would mean quantity demanded is fixed regardless of price, which doesn't apply to competitive firms - **C. Downward Sloping**: This describes monopoly or imperfect competition where firms have market power to influence prices **Correct Answer: B (horizontal)**

Author: LeetQuiz .