a) Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly elastic (i.e.,
horizontal at the going market price).
b) The manufacturer of high-quality flatbed scanners is trying to decide what price to set for its product. The costs of production and the demand for the product are assumed to be as follows:
TC = 500,000 + 0.85Q + 0.015Q 2
Q = 14,166 – 16.6P
Determine the short-run profit-maximizing price.
c) Explain why the demand curve facing a monopolist is less elastic than one facing a firm that operates in a monopolistically competitive market (all other factors held constant).