A price-taking firm cannot affect its own output price because
A)price is determined by consumers, not producers.
B)market demand is perfectly elastic; that is, even a tiny increase in price results in zero quantity demanded.
C)it is only one firm among many, so the price is determined in the market as a whole.
D)consumer preferences dictate a single price in a competitive market.
E)of government statutes, such as price floors and price ceilings.

Question

Quizplus · Accepted Answer

A price-taking firm is a small player in the overall market and has no power to influence the market price. In a perfectly competitive market, the firm is one of many and cannot change the market price, which is determined by the interaction of demand and supply. Therefore, the firm must accept the market price as given and adjust its output accordingly.

A Price-Taking Firm Cannot Affect Its Own Output Price Because