Q.

A horizontal demand curve is -

A. relatively elastic
B. perfectly inelastic
C. perfectly elastic
D. of unitary elasticity
Answer» C. perfectly elastic
Explanation: The demand curve facing a perfectly competitive firm is flat or horizontal. This is because all firms in perfect competition are by definition selling an identical (homogeneous) product. A horizontal demand curve is a flat curve with a slope of zero. It is a perfectly elastic demand curve. Because the slope of the curve is zero, it is impossible for the price to change in the market.
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