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Chapter 9: Q 15 (page 232)

How is the demand curve perceived by a perfectly competitive firm different from the demand curve perceived by a monopolist?

Short Answer

Expert verified

The demand curve for a perfectly competitive firm is seen as horizontal, this is because perfectly competitive firms are price takers. While a monopolist demand curve is downward sloping, as they are price makers.

Step by step solution

01

Step 1. The demand curve for a perfectly competitive firm.

The demand curve for a perfectly competitive firm is seen as horizontal, this is because perfectly competitive firms are price takers.

While a monopolist demand curve is downward sloping, as they are price makers.

02

Step 3. The difference between the two demand curves.

The demand curve for a perfectly competitive firm is a horizontal line parallel to the x-axis.

The price of the output does not change with a change in quantity from Q1to Q2showing that there is no change in the price.

A monopolist's demand curve is a downward-sloping demand curve.

The quantity demanded increases from Q1to Q2when the price decreases from P1to P2showing an inverse relationship.

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