Final answer:
The claim that the market demand curve is perfectly elastic in a perfectly competitive market is false. It's the demand curve faced by each individual firm that is perfectly elastic, allowing them to sell any amount at the market price. The market demand curve, however, is downward sloping.
Step-by-step explanation:
The statement that the market demand curve is perfectly elastic in a perfectly competitive market is false. In a perfectly competitive market, it is the demand curve faced by each individual firm that is perfectly elastic, not the market demand curve. This means that a perfectly competitive firm can sell any quantity of its goods at the prevailing market price without affecting the price itself. Conversely, the market demand curve for the entire market is typically downward sloping, indicating that higher prices will lead to lower quantities demanded and lower prices will drive higher quantities demanded.
By definition, a perfect competitor in such a market is a price taker and thus does not have the market power to set prices. The market demand curve reflects the combined buying behaviors of all consumers, while the individual firm in perfect competition faces a horizontal, or perfectly elastic, demand curve for its own products.