The expression "the farmer is a price taker,not a price maker," refers to the fact that
A) the market demand curve for food is perfectly elastic.
B) demand for agricultural products has declined steadily throughout the twentieth century.
C) prices of farm goods are generally set by government.
D) in perfect competition, no one producer can control prices.
E) shifts in the demand and supply for farm products have little impact on farm prices.

Question

Quizplus · Accepted Answer

The statement means that in perfect competition, farmers have no control over the prices of their products. The prices are determined by the market forces of demand and supply. Therefore, farmers have to accept the prevailing market price and cannot influence it. Thus, option D is the correct choice. Option A is incorrect because it assumes the demand for farm products is perfectly elastic, which is not always the case. Option B is incorrect because it is a generalization, and demand for some agricultural products has increased over the years. Option C is incorrect because the government only intervenes in the price-setting process in specific cases, such as price supports or subsidies. Option E is incorrect because demand and supply shifts have a significant impact on farm prices.

The Expression "The Farmer Is a Price Taker,not a Price