Demand Curve Of Firm In Competitive Market


1. The firm in a competitive market faces a demand curve that is:

A) perfectly elastic.
B) downward sloping.
C) upward sloping.
D) perfectly inelastic.

2. Assume that P1>P2> AVC. If market price decreases from P1 to P2, then the competitive firm should:

A) reduce production.
B) shut down.
C) continue to produce at the same level of output.
D) increase production.


These multiple choice questions belong to Economics. The 1st question is about demand curve in competitive market and the 2nd question is about comparing the difference between prices and average variable cost.

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