Because there is no product differentiation (in other words, because the industry is characterize by homogeneous products), no firm can charge a price above the market price.

   Because perfect competition is characterized by many firms, each firm is tiny (some authors use the term "atomistic" to remind us of how small they really are) relative to the industry. The small part each firm plays in terms of industry supply means that each firm can sell all the output it produces at the market price. Therefore, it would never wish to lower price, since sales would not increase.

   Since firms can't raise their price above the market price and since firms can sell all they wish at the market price, they face a horizontal or infinitely elastic demand curve.

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