The perfectly competitive price and output level occur where

In a perfectly competitive market, a single firm faces a horizontal demand curve because it is a price taker. This means that the firm has no control over the market price and must accept the price as given by the overall market equilibrium. The horizontal demand curve reflects that any quantity of goods that the firm wishes to sell can be sold at the market price.

There are several reasons and assumptions behind why a firm in perfect competition faces a horizontal demand curve:

1. Many buyers and sellers: A perfectly competitive market is characterized by a large number of buyers and sellers. No single firm has a significant share of the market, and therefore, no individual firm can influence the market price.

2. Homogeneous product: All firms in a perfect competition produce identical, or homogenous, products. Since there's no difference in the products, consumers have no preference for one firm's product over another's.

3. Perfect information: All buyers and sellers have complete knowledge about the product and the market prices. Therefore, a firm cannot charge a price higher than the market equilibrium, as consumers would simply buy from another seller.

4. Freedom of entry and exit: Firms can freely enter or exit the market. This means that if one firm tries to charge a higher price, new firms can enter the market, increase supply, and push the price down to the equilibrium level again.

5. No transaction costs: There are no costs associated with finding a buyer or selling a product in a perfectly competitive market.