Question

With the demand curve for diamonds being downward sloping, what can be concluded about company A in terms of market structure? Is company A a firm in a perfectly competitive^1 market or something else?

Answer 1

The downward-sloping demand curve suggests that Company A is not in a perfectly competitive market, as it indicates some degree of market power and competition.

Step-by-step explanation:

In terms of market structure, the downward-sloping demand curve for diamonds suggests that Company A is not in a perfectly competitive market. A perfectly competitive market is characterized by a flat or perfectly elastic demand curve, meaning that the firm can sell any quantity at the prevailing market price. In contrast, a downward-sloping demand curve indicates that Company A has some degree of market power and faces competition, but it is not the only firm in the market.