A perfectly competitive firm is a price taker because

Question

Quizplus · Accepted Answer

A perfectly competitive firm is one of many producers of a homogeneous product. The firm cannot influence the market price and must accept the prevailing price as given. Therefore, it is a price taker. Choice A is incorrect because a vertical demand curve is not a characteristic of a perfectly competitive market. Choice C is incorrect because if only a few firms compete, the market is oligopolistic, not perfectly competitive. Choice D is incorrect because in a monopolistically competitive market, firms produce slightly differentiated products, which enables them to have some control over the price they charge. Finally, choice E is incorrect because in a monopolistic market, there is only one firm, which has a monopoly over the product it produces.

A Perfectly Competitive Firm Is a Price Taker Because