Under perfect competition, a firm is a price taker, meaning it has no control over the price of the product and must accept the prevailing market price. As a result, the demand curve faced by a firm under perfect competition is horizontal.

Perfect competition is a market structure where there are many buyers and sellers, homogeneous products, perfect information, ease of entry and exit, and no market power. In such a market, no individual firm has the ability to influence the market price due to the large number of competitors. Therefore, each firm takes the market price as given and adjusts its quantity supplied accordingly.

The shape of the demand curve reflects the relationship between the price and quantity demanded of a product. In the case of perfect competition, the demand curve faced by a firm is perfectly elastic or horizontal. This means that the firm can sell any quantity of output at the prevailing market price, without affecting the price itself.

Explanation:

1. Homogeneous products: In perfect competition, all firms sell identical products. Since consumers have no preference for one firm's product over another, they are willing to buy from any firm at the prevailing market price.

2. Large number of buyers and sellers: Perfect competition requires a large number of buyers and sellers in the market. The presence of numerous buyers ensures that each firm has a large potential customer base, leading to a perfectly elastic demand curve.

3. Price taker: In perfect competition, each firm is a price taker and has no market power. This means that the firm cannot influence the market price and must accept it as given. As a result, the firm's demand curve is perfectly elastic, or horizontal, at the market price.

4. Perfect information: In perfect competition, buyers and sellers have perfect information about prices and products. This ensures that there are no information asymmetries that could lead to differentiation in prices. Therefore, all firms face the same market price for their product.

In conclusion, the demand curve faced by a firm under perfect competition is horizontal because the firm is a price taker and has no control over the market price. The firm can sell any quantity of output at the prevailing market price without affecting the price itself.