A decrease in the price that a price taker receives for its output will cause the firm to

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This is the typical response of a price-taking firm. Since it cannot set the price for its output, a decrease in price means that its marginal revenue and average revenue curves will shift downward. In order to maximize profit, the firm will reduce its output to the point where marginal cost equals the new, lower price. This will lead to a smaller profit or possibly a loss if the cost of producing the output is higher than the new price. However, the firm will not shut down as long as it can cover its variable costs, and it will not increase output because that would further depress the market price.

A Decrease in the Price That a Price Taker Receives