Final answer:
The purely competitive firm's demand curve is perfectly elastic because it is a price taker, meaning the marginal revenue curve is the same as its demand curve, which is horizontal at the market price.
Step-by-step explanation:
The purely competitive firm's demand curve is perfectly elastic because the individual firm is a price taker. This means that the marginal revenue curve coincides with the firm's equilibrium price, and hence the correct answer to the student's multiple-choice question is: "Because the individual firm is a price taker, the marginal revenue curve coincides with the firm's equilibrium price."
In the context of perfect competition, the firm can sell any number of units at the market price, making its perceived demand curve a horizontal line at this price level.
A perfectly competitive firm acts as a price taker, so it faces a perfectly elastic demand curve for its product. This means that the firm can sell any quantity it wishes at the prevailing market price. The demand curve is perfectly elastic because the firm cannot choose the price it charges, but must accept the price determined by market demand and supply.