Concept:In a perfectly competitive foreign market, the monopolist becomes a price taker and faces a perfectly elastic demand curve.
Explanation:The foreign market is perfectly competitive, while the home market is monopolistic.
A firm in perfect competition cannot influence the price; it accepts the market price as given.
Therefore, the demand curve facing the monopolist in that foreign market is horizontal, also called a price line.
A horizontal demand curve means the monopolist can sell any quantity at the same price
P.
This implies infinite elasticity of demand, i.e., the demand is perfectly elastic.
Thus, the monopolist’s average revenue
AR equals marginal revenue
MR and both are constant.
So, the correct description of the demand curve in the foreign market is perfectly elastic.
Answer:C. Perfectly elastic