A perfectly competitive firm is a price taker because
A)The price of the product is determined by many buyers and sellers.
B)It has market power.
C)Market supply is upward-sloping.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many buyers and sellers, and no one has market power to control the price. Therefore, a perfectly competitive firm must accept the market price, and any attempt to charge a higher price will result in lost sales. Hence, the firm is a price taker, not a price setter.

A Perfectly Competitive Firm Is a Price Taker Because