Final answer:
The demand for a perfectly competitive firm's product is a horizontal line originating at the prevailing market price, indicating a perfectly elastic demand curve. Firms in this market structure can sell any quantity at this price, which determines their revenue, costs, and profits.
Step-by-step explanation:
The demand for a perfectly competitive firm's product is a horizontal line originating at the market price. In a perfectly competitive market, firms are price takers, meaning they accept the market price determined by the intersection of market demand and supply. Each firm faces a perfectly elastic demand curve, allowing them to sell any quantity of output at the prevailing market price without affecting the price itself. Hence, the demand curve for a perfectly competitive firm's product is perfectly horizontal, depicting that the price remains constant regardless of the quantity sold.
When the firm decides on the quantity to produce, its total revenue, total costs, and profits are determined by this quantity and the prevailing market prices for output and inputs, as per the profit equation. This flexibility in quantity, combined with a fixed price, forms the cornerstone of perfect competition, distinguishing it markedly from other market structures such as monopoly or monopolistic competition, where the demand curve is downward sloping and firms have some control over the pricing of their products.