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Author Question: Why is it that the industry demand curve slopes downward when the demand curves faced by individual ... (Read 122 times)

Kthamas

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Why is it that the industry demand curve slopes downward when the demand curves faced by individual firms in perfectly competitive markets are horizontal?
 
  What will be an ideal response?

Question 2

Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. Billie faces ________ opportunity costs in the production of pillows and blankets.
 
  A) negative B) constant C) decreasing D) increasing



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rachel

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Answer to Question 1

Every firm in a competitive market is so small that it can increase production without affecting the price of the good. Therefore a firm in a perfectly competitive market faces a perfectly elastic demand curve. The market demand curve is downward-sloping, which reflects the law of demand: consumers will purchase higher quantities of a good at lower prices and lower quantities at higher prices.

Answer to Question 2

B





 

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