The correct statement is:
A perfectly competitive firm faces a demand curve that is a horizontal line.
In a perfectly competitive market, individual firms are price takers, meaning they cannot influence the market price and must accept the prevailing market price. As a result, the demand curve for a perfectly competitive firm is horizontal at the market price, indicating that the firm can sell any quantity of its product at that price, but cannot sell anything at a higher price.
The other statements are incorrect:
- Total revenue is calculated as price multiplied by the quantity sold, not fixed cost.
- A perfectly competitive firm does not face a perfectly inelastic demand; the demand it faces is elastic.
- A perfectly competitive firm does not face a demand curve that is a vertical line; that would indicate perfectly inelastic demand, which is not the case in perfect competition.