IN PERFECTLY ELASTIC SUPPLY, THE SUPPLY CURVE

• A. is vertical
• B. is horizontal ✓
• C. slopes downward
• D. slopes upward

The answer to the question is: B. is horizontal

In perfectly elastic supply, the supply curve is horizontal. This means that the quantity supplied remains constant regardless of changes in price. In other words, suppliers are willing and able to supply any quantity of a good at a given price. This situation typically occurs when producers have excess capacity and can easily adjust their production levels without incurring additional costs.

The concept of perfectly elastic supply is often used in economic theory to illustrate certain market conditions. It is a theoretical construct that assumes idealized conditions, such as perfect competition and instantaneous adjustment to price changes. In reality, perfectly elastic supply is rare, if not non-existent, in actual markets. However, it serves as a useful benchmark for understanding the behavior of supply under different circumstances.

The horizontal supply curve associated with perfectly elastic supply reflects the idea that at a given price, suppliers are willing to offer an unlimited quantity of the good. As the price increases or decreases, the quantity supplied remains unchanged. This implies that the elasticity of supply is infinite at every price level.

In summary, in perfectly elastic supply, the supply curve is horizontal, indicating that the quantity supplied remains constant regardless of changes in price.