In a competitive equilibrium, we assume that markets are such that
A)firms behave strategically in setting their prices.
B)consumers are price takers while firms set prices.
C)both consumers and firms are price takers.
D)firms are price takers while consumers set prices.
E)consumers behave strategically in setting their prices.

Question

Quizplus · Accepted Answer

In a competitive equilibrium, both consumers and firms are assumed to be price takers. This means that firms do not have the power to set prices and must accept the prevailing market price, while consumers do not have the power to negotiate prices and must also accept the market price. This assumption is a key feature of perfect competition, where no single buyer or seller has a significant influence on the price.

In a Competitive Equilibrium, We Assume That Markets Are Such