And why not a downward-sloping demand curve?
Consider the characteristic of price-taking behavior. This means the price of the product produced is determined in the industry, not by each individual firm. Because perfectly competitive firms have no market power whatsoever, they take price as a given --- thus, the demand curve is horizontal at the going market price.
Recall from the elasticity chapter that P x Q = TR.
Assume the following:
Q = 1, 2, 3, 4, 5, 6, 7
P = $5 (& stays contant due to the horizontal demand curve)
Find TR.
Find MR.
Answers to follow.
